EU’s corporate due-diligence rowback raises ‘deep concerns’ from left

A prospective U-Turn on landmark EU corporate supply-chain rules is raising “deep concern” among centre-left MEPs, potentially endangering the centrist coalition recently mustered by President Ursula von der Leyen to secure a second term, according to a letter seen by Euronews.

The EU’s Corporate Due Diligence Directive requires companies to check their supply chains for dodgy environmental and labour practices, to try and avoid disasters like Rana Plaza, the Bangladesh garment factory whose collapse in 2013 cost over 1,000 lives.

But that law, known as the CSDDD, only just scraped through the EU legislative process earlier this year. It was watered down, and nearly fully derailed, after Germany and Italy voiced concerns about the impact on competitiveness.

EU elections in June swung the European Parliament to the right, and there’s now increasing pressure to boost Europe’s sluggish economy – perhaps by rethinking green laws.

The idea that Brussels is reconsidering CSDDD rules before they’ve even taken effect is causing ripples in the left of the Parliament, who argue it will undermine Brussels’ credibility and businesses’ legal certainty. 

“We would like to express our deep concerns regarding your announcement of an omnibus simplification package due as early as February 2025,” said the letter, signed by socialist group chair Iratxe García Pérez, party grandees Ana Catarina Mendes and René Repasi, and Lara Wolters, the Dutch MEP who led Parliament’s talks on the law.

In November remarks to reporters, von der Leyen said she wanted to look again at “overlapping” rules contained in the CSDDD, a separate Corporate Sustainability Reporting Directive (CSRD) that applies to all large and listed companies, and a green “taxonomy” that classifies economic activities by environmental performance.

“We firmly ask that you exclude the very recently agreed CSDDD from this exercise,” the socialists’ letter to von der Leyen said, adding that a U-Turn would undermine the green agenda without alleviating corporate paperwork. 

The Socialists and Democrats are the second-largest grouping in the European Parliament, and 90 of its 136 members supported von der Leyen’s bid for a second term in a 27 November vote. 

But, the letter adds, that support “was grounded in the assurances provided through those commitments … that the essential substantive elements of EU reporting legislation should in no case be altered, and that simplification will not amount to deregulation.” 

Businesses, meanwhile, appear broadly favourable to von der Leyen’s streamlining plans, as they argue a hotchpotch of green laws is affecting operational capacity.

In a recent paper, Eurochambres, a lobby group representing chambers of commerce, said the “uncoordinated implementation of initiatives” including the CSDDD and CSRD is having a “non-negligible cumulative impact on business.” 

That kind of message is sure to resound in Brussels, which is currently wringing its hands over an economy that stutters while the US soars.

Another law cited by Eurochambres, the EU’s deforestation regulation – intended to ensure imports like soy, beef and coffee don’t come at too high an environmental cost – has also had to be paused for an extra year, as partners in Brazil, Indonesia and West Africa weren’t ready to implement it.

MEPs formalised that delay in a Tuesday vote, though failed in their bid to substantively water down the anti-deforestation law further.