Pressure mounted this week on German politicians to put aside their objections to a major piece of European Union corporate governance legislation.

Earlier this month, the European Council postponed a vote on new due diligence rules that would see companies check their supply chains for human rights abuses and damage to the environment. The delay was ordered after it became clear Germany would vote against the new rules, known as the Corporate Sustainability Due Diligence Directive (CSDDD).

It was widely reported that the German finance minister, Christian Lindner, had turned against the CSDDD after deciding that the new EU rules went too far, in particular on creating civil liability for international corporates. Lindner is also leader of the Free Democratic Party in the coalition led by German chancellor Olaf Scholz of the Social Democratic Party.

However, a number of campaign groups have this week made public statements in support of the CSDDD. A collection of UN bodies, among them UNICEF and the United Nations Development Programme issued a timely statement backing the directive, though remaining silent on who was to blame for the impasse.

“The adoption of the directive would represent a significant advance in the global efforts to respect, protect and fulfil children’s rights and human rights, support gender equality and address environment challenges, as well as boost efforts to create a level playing field for businesses,” the statement says.

‘Unacceptable’

A major trade union body, the EESC Workers Group, says the CSDDD is “in the interests of millions of workers and children exploited in global supply chains”. The statement adds: “It is unacceptable from the German finance minister to veto the compromises finally reached after years of negotiations and to take other governments along with this policy of obstruction.”

Some have called directly on Olaf Scholz to intervene with Lindner. Luisa Neubauer, a climate activist with the German campaign Fridays for Future, writes: “It is time for Scholz to step up and end the German embarrassment in Strasbourg.”

However, it is not only campaigners and labour organisations dismayed at the delays. The news agency Euractiv reports that major food groups, including Ferrero and Mars Wrigley, have revealed concerns. A joint statement to the Italian government, a supporter of the German stance, says: “The obligations in the directive ensure a high level alignment with the internationally recognised standards on due diligence.”

Work on the CSDDD began in 2022 and forms part of the EU’s efforts to make businesses more sustainable in line with the Paris Agreement on climate change. The final text was formally agreed in December last year and a vote last week should have been a formality.

Its key provisions mandate companies to conduct due diligence on their supply chains and then report on identification, prevention and mitigation of any behaviours that might impact human rights and the environment.

The due diligence must be integrated into company governance and risk management. A civil liability regime would mean companies could pay damages for failing to comply with due diligence responsibilities.

It remains unclear when the European Council will reconsider the CSDDD. Some sources point to fresh negotiations being required that could take months.

The CSDDD was always controversial. It is now proving a significant test of EU cohesion on climate and corporate responsibilities.