Due Diligence: Trilogue deal in balance

As we reported last week, the Free Democrats (FDP), part of the German coalition government, is blocking Germany from endorsing the deal on corporate due diligence, the Corporate Sustainability Due Diligence Directive (CSDDD). Explaining the FDP’s decision German justice minister Marco Buschmann described the proposals as a 

“self-strangulation of our [attractiveness as a] business location… we need solutions that do not overwhelm small and medium-sized companies in particular and that do not paralyse Germany and Europe in international competition with even more bureaucracy.”

German business has been highly critical of the Directive. Siegfried Russwurm, president of the federation of German industries (BDI) said:

“What is now being sold as a compromise [in Brussels] is not only bad, it simply doesn’t work,”

The CSDDD proposals are due to be voted on tomorrow (Friday Feb 9th) by representatives of EU Member States. While it may end up going “on ice”, another Directive: the Corporate Sustainability Reporting Directive (CSRD), is beginning to take effect. Companies now in scope need to collect data this year to report in 2025.

The difference between the CSRD and the CSDDD is that the CSRD only requires companies to report on human rights, environmental, and employment matters, while the CSDDD would oblige companies to take measures to mitigate any harms their policies might cause. The obligation to mitigate would cover not only the company’s own operations, but also companies in its supply chain.