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By Sharon Kimathi, Energy and ESG Editor, Reuters Digital

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Environmental and human rights supporters have voiced their concern over a “colossal misstep” and “deplorable setback” by the European Union this week, as members of the bloc stopped a proposed law that would force companies to identify and remedy human rights abuses or environmental damage in their supply chains.

A ‘qualified majority’ of 15 EU countries representing 65% of the EU population had been needed for the corporate sustainability due diligence directive (CSDDD) to proceed to a final vote in the European Parliament.

Lawmakers were expected to support it.

However, on Wednesday, not enough envoys from the 27 EU countries backed the law for it to proceed, with opposition led by Germany’s pro-business Free Democrats (FDP), part of the three-party governing coalition, who argued it would burden business with excessive bureaucracy.

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Laali, 11, holds a bloom of cotton plucked from a plant while working with her family in a field in Meeran Pur village, north of Karachi, Pakistan. REUTERS/Akhtar Soomro

Under the CSDDD, designed to enter force in 2027, large companies in the European Union would have to identify and remedy in their supply chains cases of employing forced or child labour or environmental damage, such as deforestation.

Company director remuneration would have to reflect how well the plans have been implemented.

The rules were supposed to apply to companies in the EU that have more than 500 employees and a net worldwide turnover of 150 million euros ($163 million).

For non-EU companies, the rules would have applied if the companies had 300 million euros of net turnover generated in the bloc, three years after it would come into effect.

Fines for breaching the proposed rules could be as much as 5% of a company’s global turnover.

Some 13 EU members abstained and one voted against, an EU diplomat said.

This was the second time Belgium, which holds the rotating EU presidency, had tried to secure backing for a text already agreed with the European Parliament.

Earlier this month, it withdrew it from the agenda at the last minute after Germany and Italy indicated they would abstain.

Belgium said it would assess if it was possible to address EU members’ concerns, in consultation with the parliament. Without a breakthrough in about two weeks, the law could be put on hold until after the EU parliament election in June, casting doubt on its future.

A group of 136 campaign groups said in a joint statement the blockage was a “deplorable setback”, orchestrated by Germany’s FDP and hit by a last-minute attempt by France to propose a 10-fold increase in the employment threshold.

“The Council of the EU’s failure to greenlight the CSDDD is a colossal misstep,” said Steve Trent, CEO and founder of the Environmental Justice Foundation.

“Not adopting it is a betrayal of consumers and companies, human rights, our planet, and future generations,” he added.

Earlier this month, investor groups called on EU states to back a deal that would require large companies to check their supply chains for damage to the environment and rights abuses and face fines if they do not address it, after Germany indicated its opposition.

Investors have consistently pushed to get more detailed data from companies in the real economy on environmental and social issues so they can more accurately track the sustainability of their own portfolios to help hit their climate goals.

Critics said it would pile further reporting requirements on EU companies which must already comply with a separate set of environment, social and governance (ESG) disclosures from 2024, but last month, the EU Council said the final text would avoid duplication between the two sets of rules.

Teachers observe a minute of silence during a 24-hours strike to mark one-year after a deadly train crash killed 57 people. Athens, Greece. REUTERS/Louisa Gouliamaki

Richard Howitt, a British Labour Party politician with 22 years service in the European Parliament, shares his thoughts on the defeat of the proposed EU law for human rights and environmental due diligence on global supply chains:

“A broad consensus has been created of companies and investors who wanted Europe to push forward mandatory human rights due diligence and today’s vote to reject the new law is an historic failure in the quest to advance business respect for human rights.

“The suggestion that negotiations with the European Parliament might rescue the Directive in some form is constitutionally novel at this stage, but remains the last hope of salvaging what was due to be one of the most significant pieces of European law-making in years. 

“As it stands, Europe has thrown away the opportunity to provide real leadership to clean up abuses in global supply chains and it is child and slave labor, sweatshop workers and communities inflicted with dangerous pollution who will ultimately suffer most.

“The defeat also leaves a contradiction in EU law with companies already required to report on due diligence efforts, but now denied the clear framework through which to implement them.

“The proposed due diligence law would have required companies to assess their environmental and human rights risks in their supply chains, to take action to prevent or mitigate harms and provide liability where they did not. 

“It is a shocking occurrence that EU governments vote down a proposal to which they had previously given political agreement. 

“Quite simply politicians have hugely mis-read signals from business and governments are badly lagging companies in understanding their obligations in a globalized world.” 

India’s farmers are protesting over legal guarantees for a minimum purchase price for all crops. The protest comes just months before a general election due by May.

Over 40% of India’s 1.4 billion people are dependent on agriculture and many say they have suffered economically under Prime Minister Narendra Modi at the expense of their urban counterparts.

“Since India has failed to move people out of agriculture, unlike most Asian countries, income levels have dropped, and that is why the anger is spilling over,” said Uday Chandra, assistant professor of government at Georgetown University in Qatar. Click here for the full Reuters story.

Volunteers retrieve a lantern stuck in a tree and search for information on the lantern for its release year for research purposes, in New Taipei City, Taiwan. REUTERS/Ann Wang

Today’s spotlight highlights a post-lantern light show clean up initiative in Taiwan.

Every year on the cusp of spring, hundreds of lanterns float into the skies around a small town in northern Taiwan, a spectacular light show that is one of the island’s top tourist draws.

When the flames go out though, the spent lanterns fall back to earth littering the countryside around Pingxi, in the mountains outside of Taipei.

Now a group of volunteers is leading school children to scour the countryside to gather the debris and take it to be disposed of safely.

Lanterns are launched into the skies, powered by small wads of burning paper soaked in oil as a way of seeking good fortune and wishes for the year ahead, traditionally at the end of the Lunar New Year which marks the start of spring.

Today’s Sustainable Switch was edited by Mark Potter

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