France joins Germany to demand scrapping of EU law on ‘ethical’ supply chains

France has joined Germany in demanding an outright withdrawal of an EU law on ‘ethical’ supply chains, which, if supported by other member states, would take the bloc’s pro-business, ‘less-green’ drive to another level and potentially have a positive bearing on negotiations with the Trump administration to secure a trans-Atlantic trade deal.

The Corporate Sustainability Due Diligence Directive (CSDDD) was initially proposed by the European Commission in February 2022, setting out obligations for companies to identify, assess, prevent, mitigate, address and remedy impacts on people and the planet – ranging from child labor and slavery to pollution and emissions, deforestation and damage to ecosystems – in their upstream supply chain and some downstream activities such as distribution and recycling, explained Mark Segal, founder of ESG Today, an online platform for Environmental, Social and Governance (ESG) issues.

It was formally adopted and published in the EU Official Journal in July last year when provision was made for it to come into operation on a staggered basis in the coming years.

‘Unnecessary or Disproportionate Rules’

The European Commission defined the CSDDD’s aim as “to foster sustainable and responsible corporate behavior in companies’ operations and across their global value chains” and “ensure that companies in scope identify and address adverse human rights and environmental impacts of their actions inside and outside Europe.”

However, February this year saw the EU’s executive rowing back, with the launch of the Omnibus 1 Package’, “to address overlapping, unnecessary or disproportionate rules that are creating unnecessary burden for EU businesses,” and which proposed a significant reduction in sustainability reporting and a delay in the implementation of the CSDDD by a year to 2028.

At the start of this month, in a speech on the occasion of an investment summit in Versailles, French President Emmanuel Macron, went considerably further than these proposals and called for the Directive to be abolished.

“CSDDD and some other regulations have not just to be postponed for one year, but to be put off the table. I’m not even speaking about the content (of the Directive). I’m just speaking about how to synchronize with the U.S. and the rest of the world,” he told a gathering of business leaders who applauded his comments.

He added that France was clearly “very aligned now” with Germany whose Chancellor, Friedrich Merz, had called for a “complete repeal” of the Directive during a visit to Brussels earlier this month.

Macron had framed the ‘elimination’ of the CSDDD as part of a major push to reduce regulatory and compliance burdens on companies to help improve competitiveness by creating a level playing field with the U.S., China and other companies, according to ESG Today’s Segal.

Concession to Washington?

For years, European industry groups have raised concerns about what they view as the excessive demands of the Green Deal – the vision to make the EU the first climate-neutral area in the world by 2050, arguing that it harms their operations and contributes to the EU’s broader economic stagnation.

Many companies have pushed back against the sustainability Directive, criticizing it as overly burdensome and adding to bureaucracy. Moreover, small businesses are said to be particularly exposed to its negative effects.

According to the Politico EU news platform, the Trump administration has singled out the CSDDD as the kind of non-tariff barrier that it blames for the U.S.’ substantial trade deficit with the EU.

So, if it were scrapped, the bloc could present the move as a concession to Washington, it speculated.

However, although driven by Germany and France, the EU’s leading economies and whose sphere of influence in Brussels is significant, it is nevertheless likely to take a good deal of politicking on their part to convince other European member states and legislators to back the call to scrap the CSDDD.

Even Germany’s new coalition government is divided over the Directive, with Merz’s conservative Christian Democratic Union (CDU) supporting its abolition and the center-left Social Democratic Party (SPD) openly opposed to such a move.

‘Rewarding Short-Sighted Corporate Lobbying’

A more unified stance comes from the academic world, where more than 90 prominent economists in the EU, grouped under the banner of the European Coalition for Corporate Justice, recently issued a warning regarding the Omnibus 1 Package and attempts to dilute the CSDDD and the Corporate Sustainability Reporting Directive (CSRD).

They claimed such proposals posed a significant setback that could jeopardize the EU’s global leadership in sustainability and human rights and also dismissed the assertion that sustainability regulations adversely impact companies’ competitiveness.

“Economic choices are political choices. With the Omnibus proposal, the European Commission is choosing to reward short-sighted corporate lobbying at the expense of people, the planet and long-term economic resilience,” observed Prof. Dr. Johannes Jäger, of the University of Applied Sciences BFi, in Vienna.

‘Politicians Need to Make Up Their Minds’

If scrapped, the CSDDD would amount to a political reversal, which often comes “at a cost of wasted effort,” highlighted James Hookham, director of the UK-based Global Shippers Forum (GSF) - a grouping of national shippers’ associations.

“I do know that many importers have spent months and dedicated considerable resources to preparing for the introduction of this and several similar EU directives. Politicians need to make up their minds quickly to help businesses know where they stand.”

He added: “This has just happened in the UK where years of preparation by government departments and industry for the post-Brexit introduction of border checks of food imports - the so-called Sanitary and Phytosanitary checks - now look as though they will be unnecessary under the terms of the UK-EU ‘reset’ agreement announced recently.”