BRUSSELS – The European Union (EU) has come under criticism from environmental campaigners after member states approved a revised corporate sustainability directive that has significantly reduced the scope of laws designed to hold companies accountable for human rights abuse and environmental harm in their supply chains. The directive, which was first agreed upon in December, was nearly scuttled when a minor coalition partner in the German government withdrew support. However, after a month-long search for compromise and further lobbying from France and Italy, the directive was approved on Friday.
The Belgian government, which currently holds the rotating presidency of the EU Council, played a role in drafting a compromise that limits the number of companies expected to comply with the law. Under the new agreement, the directive will apply to companies with more than 1,000 employees and a net turnover of €450m (£385m), which is triple the previously agreed amount. These changes are estimated to exclude approximately 70% of the companies originally intended to be covered by the law.
Environmental groups have expressed disappointment at the watering down of the rules, claiming that it will have a significant impact on the law’s effectiveness. Uku Lilleväli, a sustainable finance policy officer at WWF, stated, “The EU countries endorsed the much-needed due diligence law, but at what cost? We’re left with bare bones, with an already weak framework that now covers only a fraction of all large companies.” The rules, which still need to be approved by the European parliament before coming into force, provide a framework for communities to take legal action against EU companies for human rights abuses and environmental harm in their supply chains.
Opponents of the law argue that it places an unfair burden on small and medium-sized enterprises (SMEs) and could lead to increased legal challenges. Markus Beyrer, the director general of lobby group BusinessEurope, claimed that SMEs will be negatively affected by the added obligations and harsh sanctions imposed by the law. The Chinese chamber of commerce to the EU has also voiced concerns over the potential trade disruptions and cost increases that could arise from the law.
The watering down of the directive has been met with disappointment and criticism from campaigners. Anaïs Berthier, the head of the Brussels office of environmental law campaign group ClientEarth, called the last-minute changes “an affront to democracy” and stated that “corporate pressure and political games have butchered an opportunity to revolutionize how business is done in the EU.” The trend of disregarding environmental laws, according to Berthier, is worrying, as it may set a precedent for future legislation.
This new directive and its reduced scope highlight the ongoing challenges faced by the EU in balancing corporate responsibility with economic interests. As the directive moves towards approval in the European parliament, stakeholders will closely watch whether further amendments and compromises will be made to address the concerns raised by environmental campaigners and ensure the effective implementation of the legislation.