Hot debates on Corporate Sustainability Due Diligence Directive

While several European Parliament Committees recently discussed the Corporate Sustainability Due Diligence Directive (CSDDD), the reports and opinions issued seem to exclusively focus on will to push for a wider scope of the Directive.

Since the start of the discussions on the file, MEPs had expressed conflicting views regarding the scope of the CSDDD. In particular, there are strong disagreements over the potential inclusion of SMEs in the scope and on whether the proposed legislation should cover the value chain or the supply chain.

Inclusion of SMEs?

On the first point, the rapporteurs from the Committees on Legal Affairs (JURI), Lara Wolters (S&D, Netherlands) and from the Economic Affairs (ECON), René Repasi (S&D, Germany), seem to agree that the CSDDD should be extended to SMEs.

MEP Barry Andrews (Renew, Ireland), rapporteur for the International trade committee (INTA), suggested aligning the scope of the CSDDD on the Corporate Sustainability Reporting Directive (CSRD) and believes the inclusion of SMEs in the scope of the Directive would benefit the whole supply chain.

Several MEPs do not agree with this position. For example, MEP Adrian Vazquez Lazara (Renew, Spain) acknowledged that, while the inclusion of SMEs could be a possibility in future, it should only be implemented once the legislation is tested on large companies.

MEP Martina Dlabajová (Renew, Czechia), rapporteur for the Committee on Industry, Research and Energy (ITRE) argued that SMEs should remain excluded from the scope of the proposal.

The European Commission, reacting to the MEPs’ comments on the inclusion of SMEs into the scope, indicated that it chose to take a step-by-step approach when implementing, for the first time, binding due diligence measures. Therefore, it considers that the proposal tabled, covering 50% of the market, represents a balanced approach.

Value chain vs supply chain

On the latter issue, the leading JURI rapporteur argued in favour of the ‘whole value chain’ approach in order to consider all the risk.

On the contrary, the INTA rapporteur from Renew, MEP Andrews, proposed to amend the proposal by replacing value chain with supply chain.

In general, there is a consensus among political parties to adopt a risk-based approach and to implement a prioritisation of risks.