What’s next for the CSDDD after postponement?
Addressing environmental and human rights abuses in supply chains is becoming an increasingly significant part of the European food industry. Legislation retains a key role in bringing this to the forefront of public and political consciousness.
The Committee of Permanent Representatives’ (COREPER) vote on the implementation of the corporate sustainability due diligence directive (CSDDD), a piece of EU legislation that would have meant large companies, including those in the food industry, were forced to ensure their supply chains are free of human rights abuses and environmental destruction, has been postponed following the declared abstention of Italy and Germany from the voting.
The legislation, while not targeting food and beverage specifically, would have significantly altered the industry. Its postponement means forecast changes will not, at least for now, be put into place.
What is the CSDDD?
The CSDDD is a piece of legislation that would have enshrined into law the requirement of large companies to mitigate or remove elements of human rights abuses and environmental destruction within their value chains.
“The proposed legislation sets out a catalogue of international environmental and human rights regulations for which companies must establish due diligence processes (policy statement, risk analysis, remediation, grievance mechanism, reporting),” Stefanie Sabet, managing director and head of the Brussels Office at the Federation of German Food and Drink Industries (BVE), told FoodNavigator.
Traceability
Many private sector players have their own initiatives to keep their supply chains free of environmental and human rights abuses. Traceability technology plays a key role in this, with technology such as GPS and blockchain used to ensure that products can be traced back to their sources.
The directive is designed to target large, multinational companies. In order for it to apply, companies must have 500 or more employees (250 for high-risk industries) and an annual turnover of at least €150m.
According to Sabet, the directive targets SMEs as well because of its attention to the value chains of these large businesses, which may include SMEs.
According to the European Coalition of Corporate Justice (ECCJ), however, it is the duty of large businesses to provide financial and non-financial support to SMEs to prevent them being impacted. This include indirect investment, such as investment in facilities, as well as direct investment.
“The CSDDD protects SMEs by rebalancing and clarifying the responsibility between large companies and SMEs in the value chain. The directive is very clear stating that large companies bear the cost of verification so that they cannot pass it down to SMEs", said Julia Otten, senior policy lead at law firm Frank Bold.
Businesses affected both inside and outside the bloc
Many of the companies affected are those within the food industry. “Due to the value chain approach, all companies in the food industry in Europe will probably be directly or indirectly affected by this law, we expect enormous bureaucratic costs and also the disruption of supply chains,” BVE's Sabet told us.
Businesses outside the EU, she went on to say, will also be affected if they have business within it, and due to the high costs involved some may terminate business in the bloc.
Why has it been postponed?
The vote on the CSDDD has been postponed because both Italy and Germany have announced their abstention.
Before Germany’s abstention, German Justice Minister Marco Buschmann from the Free Democratic Party (FDP) had lobbied against the act, urging other EU member states to vote against it.
“The protection of human rights is part of the EU's core identity. I therefore fully support the Directive’s aim of ensuring better protection of human rights and the environment in the supply chains of European companies. However, this goal must not lead to the self-strangulation of Europe as a place of business. After all, economic performance is the basis for prosperity – especially in times of great geopolitical change,” said Buschmann of the CSDDD.
“EU regulation of supply chains must offer solutions that strengthen the protection of human rights, but which also take our economic situation into account. What is needed are solutions that do not overburden small and medium-sized enterprises in particular, and that do not paralyse Germany and Europe in international competition with even more bureaucracy.
Safe harbour rule
A safe harbour rule is a legal provision that allows a company to sidestep regulatory liability in certain situations and when certain conditions are met.
“For us, it was important to negotiate until the very end and then carry out an overall assessment of the result to determine if it is acceptable. Our concerns have not been allayed; the risks for the European and German economy outweigh the gains.”
According to BVE's Sabet, the directive did not meet certain German requests, such as the introduction of a 'safe harbour' rule.
What happens now?
The vote on the CSDDD has been pushed into the future, due to EU member states’ failure to reach a consensus. In order for a vote to go through, either Germany or Italy would need to be persuaded to change their minds.
If Member States are unable to agree to vote it through, the legislative process in drafting the CSDDD could have to restart until legislation that all states are happy with is drawn up.
Furthermore, with many predicting that climate-sceptic parties will gain more influence in the EU following the European elections in June, the legislation, with its significant green element, could be killed off.
"It's extremely, extremely risky to postpone it after the elections, so to my mind it needs to be voted before," said Anna Cavazzini, MEP for the German political party Alliance 90/The Greens.
