FDP opposition puts planned EU corporate sustainability due diligence rules at risk

The opposition by the German co-governing Free Democratic Party (FDP) could prevent the planned adoption of sustainability and human rights rules for the EU's companies' supply chains, reports business daily Handelsblatt. The EU's corporate sustainability due diligence directive (CSDDD) would set obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners. It would require large companies to adopt and put into effect transition plans for climate change mitigation. The pro-business FDP is now calling for changes to the "unrealistic" rules which it says burdens companies at a time of high energy prices and international crises. The party criticised the EU directive for its potential to create "legal uncertainties" and go much further than the German supply chain law. It says that requirements such as the transition plans are "a disproportionate bureaucratic burden" for companies. Business and industry associations have also called on the government to oppose the directive.

Negotiators from the European Parliament and member state governments in the EU Council already reached a deal on the directive in December, and objections are usually raised during these negotiations. A deal is then simply rubberstamped by both institutions before taking effect, there are no further amendments to the text. The FDP now backpedalling means that the German government would have to abstain in the upcoming EU Council decision. In that case, Italy could also abstain, which would mean that the necessary majority would be at risk, writes Handelsblatt. However, the newspaper reported that the German government coalition is still negotiating, and a final decision has not yet been made.

The FDP acted in a similar way last year after the European Parliament and the Council made a deal on phasing out new combustion engine cars by 2035. This caused widespread criticism and worries that the behaviour could set a precedent for EU negotiations, where provisional deals would be re-opened, leading to a much more complicated legislative process.