Can the EU’s embattled CSDDD be saved?

Last week was broadly regarded as a last-chance saloon to get the EU’s new Corporate Sustainability Due Diligence Directive (CSDDD) over the line. But a crucial vote was postponed yet again due to widespread disapproval, with around half of MEPs opposing the Directive.

First proposed about two years ago, the Directive will enshrine in law new requirements for large businesses to take responsibility for human rights and environmental standards across their supply chains. It will also

While some believe the CSDDD is a natural next step for corporate sustainability regulation in the EU, building on new reporting requirements introduced last year, the opposition largely stems from a perception that the Directive will over-burden SMEs.

The EU Presidency has already re-worded the Directive to ensure that it only applies to businesses with 1,000 or more staff plus annual turnovers of €300m or more. Other amendments were made to confirm a multi-year delay in implementation for smaller firms. Further changes are now in the pipeline in the hopes of pushing the Directive through in an eleventh-hour vote.

Ahead of her appearance at edie 24 next week (scroll down for details), the co-chair of the WBCSD’s global imperatives advisory board Claire O’Neill shared her thoughts on the growing wave of sustainability regulations facing businesses in Europe.

The WBCSD is a CEO-led initiative that convenes more than 230 businesses. Most are large and, as such, will likely be in the initial scope of requirements like the CSDDD.

O’Neill said: “There is always discussion around whether action is driven by regulation, or regulation is driven by action.

“On the one hand, you’ve got a kind of backlash happening. Some disclosure pathways are starting to feel a bit too restrictive and theoretical to some organisations.

“CSDDD could be a very good standard but if it is perceived to be so burdensome on introduction, something needs to be scaled back.

“On the other hand, we’re continuing to see that transparency through regulation – so, what the US Securities and Exchange Commission (SEC) is proposing, what the EU is proposing – is really making a difference. Businesses are confronting the reality of what they are doing and, as such, realizing we are wildly off-track.”

Beyond top-line targets

O’Neill is co-chair of the WBCSD’s Global Imperatives Advisory Board – the part of the organisation that maps out, and seeks to deliver, systems change to combat the biggest issues of our age. These issues, known as ‘imperatives’, are threefold: the climate crisis, the accelerating loss of nature, and widening social inequality.

The UN has warned that, across all three imperatives, progress is broadly either stagnant or going backwards.

O’Neill admits that attempts to tackle these imperatives in the middle of an economic downturn and with elections on the horizon for many major economies face all manner of challenges.

The mood in governments and the private sector when top-line targets were first set, like the UN’s Sustainable Development Goals in 2012 or the Paris Agreement in 2015, was more buoyant and triumphant. Now, many leaders have been in a crisis management mindset for a prolonged period.

O’Neill reflected: “ I do feel that we’re in a new phase of this whole conversation. It was really easy, in the last 10 years, to set targets and demand certain things. I did that as part of the [UK] Government that brought in net-zero legislation.

“I think the actual reality of this, in a world where international cooperation is breaking down, is upon us.”

The biggest danger, O’Neill believes, is that leaders see any kind of action as too burdensome and abandon “even the most basic” of business requirements on sustainability. For example, the Trump administration in the US previously rolled back on more than 100 green policies including energy efficiency standards for everything from lightbulbs to buildings. This could happen again, on an even bigger scale, should Trump succeed at the forthcoming elections.

O’Neill argued the case for pushing through even weakened regulatory requirements for businesses on ESG in this environment, then striving to strengthen them over time.

She said: “My view is that we often try and make perfect the enemy of the good with any disclosure or regulatory standard.

“This is similarly true in the carbon markets, where I do a lot of work. We’re painfully getting towards a set of core carbon principles to show what quality looks like.

“Taking things that often start on a voluntary basis, making them better, is, I think, often a better way than trying to mandate perfection.”

If regulation with a hard line is off the table, policymakers may wish to contribute to voluntary guidance instead in the interim, she added. This has been the case with the Taskforce on Climate-Related Financial Disclosures (TCFD), which was mandated for large businesses in the UK some five years after it was first launched.

O’Neill said: “I don’t think most companies have an issue reporting on human rights, or equity, or diversity. The challenge there is that you’re often reporting ahead of statutory guidance, which makes the process really tricky.

“I think we just have to be mindful of those apprehensions and work with them.”

HEAR FROM CLAIRE O’NEILL AT EDIE 24

The WBCSD’s Claire O’Neill is speaking at edie 24 on Wednesday 20 March.

The former UK energy minister will join other thought leaders for a panel on policymaking for a sustainable future in this mega-election year. She will be speaking alongside Chris Stark, outgoing CEO of the UK’s Climate Change Committee; Natalie Campbell, London Mayoral candidate and co-CEO of Belu; and Jim Skea, chair of the Intergovernmental Panel on Climate Change.

edie 24 is the brand’s largest face-to-face event of the year and will convene hundreds of sustainability and energy leaders in central London on 20-21 March 2024 for two monumental days of keynote speeches, panel debates, unparallelled networking opportunities, interactive workshops and more.

Experts speaking alongside O’Neill on this year’s packed agenda include:

• Chris Packham, renowned naturalist and presenter
• Hannah Cornick, head of sustainability and social innovation at Danone
• Emily McKenzie, technical director of the Taskforce on Nature-Related Financial Disclosures (TNFD)
• Emma Pinchbeck, CEO of Energy UK

Tickets for the event are available now on an individual, group and sharing basis, with a full price list available here.

With places limited, edie users are encouraged to book edie 24 tickets now. You can secure your place here.