Due diligence, EU Council presidency pressing member states

Brussels – A week after the failed last attempt, the Belgian presidency of the EU Council is set to reintroduce to member countries the indigestible dish of the new corporate sustainability rules, with the hope that the “important changes” made to the text “to meet the concerns of states and businesses” will be enough to unblock the agreement.

EU ministers at the Competitiveness Council reopened the issue of the due diligence directive. An update on the governments’ reactions to the compromise presented by Belgium after the agreement found in December with the parliament was scuttled twice in February. “We have revised the scope of the directive,” Jo Brouns, the Flemish government’s Minister of Economy and Innovation, explained at a press conference on behalf of the EU Council presidency. The minister announced his intention to submit the issue to the 27 permanent representatives as early as tomorrow. However, it is reportedly too early, and the item will not be on the agenda tomorrow at COREPER (the meeting between the 27 permanent representatives).

According to the text that came out of the trialogues, all companies with more than 500 employees and a worldwide turnover of more than 150 million euros would no longer have been able to ignore non-compliance with ethical and environmental constraints throughout the supply chain. The obligations would have also applied to medium-sized enterprises (with more than 250 employees and a turnover exceeding €40 million) in the sectors of production and wholesale trade in textiles, clothing and footwear, agriculture, forestry and fishing, food production and trade in agricultural raw materials, mining and wholesale trade in mineral resources or manufacture of related products, and construction.

However, faced with resistance from 14 national governments (including Italy, Germany, and France), the EU Council has proposed raising the thresholds for applying the rules from 500 to 1,000 employees and from 150 million to 300 million in turnover. Something has moved, as evidenced by the endorsement of the new text announced today by the Secretary of State of Finland, one of the first-hour opponents with Berlin, Rome, and Vienna.

How long before the approval: the positions of Germany and Italy

To achieve a qualified majority,  15 out of 27 countries are needed, representing at least 65 per cent of the total EU population. With Helsinki’s change of position, only one is missing for the game to be reopened and the text to land back in the parliament for final approval. Which, given the changes, would not be a foregone conclusion in any case.

Germany’s Secretary of State for Economic Affairs and Climate, Sven Giegold, had voiced support for the amended text, which has the merit of accommodating “many of the concerns of industry.” Nevertheless, the minister, a member of the Green Party, remains hostage to the liberals in Berlin’s ruling traffic light coalition. “I cannot speak for the whole government: you know we have a coalition of three parties, of which two would like to support the directive, and one is still sceptical.”

Even the other major contrarian, Italy, does not seem convinced. At least from the statements of the Minister for Enterprise and Made in Italy, Adolfo Urso, who spoke of a “position shared with other producer countries such as Germany and Austria” and insisted on the need to give “effective guarantees and therefore exceptions to small and medium-sized enterprises that obviously cannot follow the entire production chain.” This is a point that, on closer inspection, is already fully recognized by the Belgian text, given that enterprises remain medium-sized with up to 250 employees and a turnover not exceeding €50 million.