All eyes on Italy, France as swing states on ‘heavily’ revised EU supply-chain law

The fate of the EU corporate due diligence law (CSDDD) rests in French and Italian hands ahead of a Friday (8 March) member states’ vote on a heavily diluted draft, in what some say is the last chance to save the file before the end of the current mandate.

The two countries are at this stage effectively ‘the swing states’ on the file given their persistent reservations and their vote weighting within the Council – and are understood not to have reached a stance on whether the sweeping revisions put forward by Belgian negotiators appease the “concerns” they raised last week. 

The revised CSDDD draft has passed to French Prime Minister Gabriel Attal’s and President Emmanuel Macron’s offices for a higher-level decision, which may become clearer on Thursday (7 March), Euractiv understands. Meanwhile, the amended text is being reviewed by Italian Prime Minister Giorgia Meloni and several ministries, with Minister of Enterprises Adolfo Urso set to add more insight at 1pm today, on the sidelines of the bloc’s meeting of competitiveness ministers in Brussels.

“At this stage, it is really a political matter,” a source close to negotiations said.

The revised text, circulated on Wednesday by Belgian diplomats, comes after some 14 countries blocked progress on the law, prompting both Belgium and Parliament’s rapporteur in charge of the file – S&D’s Lara Wolters – to start “slashing through the text” in the hopes of it being approved.

Given the extent of changes and concessions conveyed by the new draft, Belgian deputy prime minister David Clarinval posted an hopeful mood this morning.

“The [Belgian] presidency is doing everything it can to reach an agreement and is proposing modifications and adaptations” he told the press at the start of the Competitiveness Council meeting, “So we are always optimistic. We’ll see what the different countries think and if it’s possible to reach an agreement.”

One of the key proposed amendments  – significantly reducing the number of affected companies and delaying implementation by three to five years from the entry into force of the law, depending on a company’s size – is expected to encourage French diplomats to endorse the law, edging closer to their most recent requests.

In Italy, the outcome remains less certain and seems to follow an uneven split within the industry, which pitches Confindustria, the largest business association which recently called on the government to abstain from the vote, against numerous other sector associations that have actively endorsed it. These include the National Artisan and SMEs Association (CNA), the national cooperatives association (LegaCoop); a joint group of food multinationals including Ferrero, Italian members of the European Brand Association (AIM), including Barilla and Lavazza; national members of the World Business Council for Sustainable Development (WCSD), including ENI and Pirelli and local members of the Responsible Business Association (RBA).

Contacted by Euractiv, Confindustria declined to comment on the new Belgian compromise.

“Italy hasn’t advanced any specific or targeted demand on the text,” a source from a Brussels-based NGO noted, as its officials “have only vaguely referred to [the law carrying] ‘burdens for the country’s economy’, ’’ despite the fact the Italian economy is mostly comprised of SMEs, now fully excluded from the legislation.

“By excluding a very large portion of the country’s businesses, the text now also eliminates the alleged burden to its economy, one would assume,” the source said.

‘No more to give in on’

This week’s amendments may overall have squeezed the political room for legislators to justify their continued opposition to the law ahead of the last feasible window for the Parliament’s plenary session (in April) to approve CSDDD before the EU elections, a source from a global sustainability-focused initiative said.

“There is no more [negotiators] can possibly give in on unless they start deleting whole articles,” he said.

The revised text downsizes the scope of the law to companies with 1000 or more employees and with an annual turnover of €300 million or over – from 500 employees and €100 million respectively in the previous text – but also combines the new, narrower scope with a softened provision on civil liability.

Under the latter clause, which defines what activities a company can be legally liable for, companies will now only have to conduct due diligence on their downstream distribution, transport and storage operations.

Conversely, they will no longer have to account for the product disposal stage, which involves activities such as dismantling, recycling, and landfilling. Moreover, activities carried out by any of their ‘indirect business partners’ will also fall outside of their liability.

“If you reduce the scope and the [affected portion] of the chain of activities, you get a real knock-on effect on the extent of civil liability” implied by the law, the source said.

Financial remuneration incentives for managers who set out and implement clear climate targets have also been dropped from the text, while member states are now granted the flexibility to decide who can initiate collective redress against a company considered in breach of the new requirements – for example, NGOs.

Given the “heavy concessions” introduced in the Belgian compromise, the source said it would now be “very difficult” for member states to credibly oppose the law and for large companies “to justify that they don’t have the resources to carry out minimum fundamental due diligence.”

Overall, “the new text heavily reduces the scope of the legislation, but it’s nonetheless an essential first step,” the NGO source said.

Sabrina Pignedoli, an Italian MEP from the 5 Star Movement, said that despite its meaningful concessions to member states, the amended text still marked a vital starting point.

Even if the legislation was considerably “watered down” from Parliament’s initial “ambitious position,” “the EU needs this directive because, for the first time in [EU] history, businesses are held accountable for human, environmental or labour abuses across their production chains,” she told Euractiv.

Pignedoli urged the Italian government to “stop protecting those who already have power, and finally support the new text” on Friday.

[Edited by Alice Taylor]

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