Today’s political decision by the EU Member States on the Corporate Sustainability Due Diligence Directive (CSDDD) risks dismantling key provisions essential for protecting smallholder farmers and stripping the Directive of its potential to foster fairer, more resilient global supply chains. We urge the European Parliament to push back against this latest diminution of Europe’s sustainability ambitions.
Despite overwhelming support for a risk-based approach aligned with international standards from investors, businesses and industry voices, including the Cocoa Coalition ( Ferrero, Nestle and others), and FoodDrinkEurope (Coca-Cola, Danone, JDE Peets, Unilever and other)s, the Council has voted to limit due diligence to direct suppliers ( tier-1) unless specific harms are proven further upstream. This means that the indirect suppliers in the deeper tiers of global supply chains, where typically the most severe human rights and environmental risks are concentrated, will not be subject to due diligence.
These investors, businesses and industry voices recognize the benefits of a unified due diligence structure that creates a more equal marketplace rooted in respect for human and environmental rights.
Corporate Sustainability Due Diligence Diluted
The Council has also proposed increasing the employee and turnover threshold needed for a company to fall under the provisions of CSDDD. Although the Commission had left the scope untouched, the Council is now raising the application threshold of the CSDDD to companies with more than 5,000 employees and a turnover of 1.5 billion euros. This means that the CSDDD is now only applicable to approximately 1,000 companies (in contrast to more than 3,000 companies).
This drastic reduction in the scope of CSDDD ensures that the real issues of global trade are not addressed at the root, where at-risk communities work to produce the products that power the global economy and feed the world. With only tier-1 suppliers in scope, due diligence through CSDDD will address only what we can see, and ignore the problems we should not wait to fix. These changes risk undermining the core principles of responsible business conduct, particularly the protection and inclusion of the 600 million smallholder farmers worldwide who are indispensable to the resilience of Europe’s supply chains.
With this latest decision coming from the European Council, the promise of CSDDD has been dealt another blow. In their assessment of risks to people and the environment, companies would not need to look beyond their tier-1 suppliers and only need to conduct in-depth investigations further down the chain if there are overt indications of abuses. This latest limitation in scope ensures that smallholders and workers at the start of supply chains will see no support in their efforts to address social and environmental issues in their practices.
“The Council’s approach flips due diligence on its head: forcing companies to act only after the damage has been done.”
Boukje Theeuwes, Head of Policy at Solidaridad Europe
“The Council’s approach flips due diligence on its head: forcing companies to act only after the damage has been done. This won’t address the problems of global trade, it will sweep them under the rug, along with any hope for addressing the root causes of sustainability challenges in these sidelined communities.” says Boukje Theeuwes, Head of Policy at Solidaridad Europe.
MEPs urged to stand up for real due diligence
Since February, the Commission’s Omnibus Simplification Package has driven a political push to pare back corporate-accountability legislation. Today’s decision from the Council is a clear signal that they too are looking to dilute CSDDD, in the misapprehension that this will be good for European business. It will not.
The CSDDD could help create a level playing field by ensuring all companies follow the same human rights and environmental rules, giving suppliers clarity on European buyer expectations. This has widespread support from companies and offers an opportunity for the EU to help transform global supply chains. The Council’s proposal to include a review clause, by which they postpone the potential adoption of a risk-based approach covering the whole supply chain, undermines not only the urgency of addressing human and environmental harms but also the credibility of the EU as a leader on sustainability and human rights.
While a stark reminder of what is at stake, the Council’s position is not the final word on the matter. The Council text now moves to trilogue negotiations with the European Commission and the European Parliament, which is still negotiating its mandate and is due to vote in October. We at Solidaridad urge MEPs to stand with smallholders, responsible businesses and investors by pushing for a truly risk-based, whole-supply-chain Directive. The promise of the CSDDD is in your hands.
For more information on Solidaridad’s position on CSDDD and due diligence, please reach out to Eoghan Hughes at eoghan.hughes@solidaridadnetwork.org.