Despite fierce negotiations, an amended form of the EU’s human rights due diligence directive has passed its final hurdle, causing disappointment but also muted praise for creating a milestone in corporate law.

The Corporate Sustainability Due Diligence Directive (CSDDD) was finally given the go-ahead by the Council of the European Union this week.

The directive mandates that big corporates identify, mitigate and report on the impact of their operations on human rights and the environment.

While it remains a major piece of legislation, campaigners pointed out that its scope is massively reduced compared with original proposals.

ClientEarth, a campaigning not-for-profit, highlights that negotiations cut the scope of the CSDDD from around 3,400 companies to 1,000. The final version of the directive also dropped the need for companies to publish climate transition plans.

Climate discomfort

ClientEarth’s report says: “The substantial reduction in scope undermines the CSDDD’s intended impact and regulatory predictability, while the removal of climate transition plan requirements weakens Europe’s capacity to meet its binding climate targets.”

But the report also adds: “Even with its limited scope, however, the CSDDD remains a pivotal instrument for corporate accountability in relation to environmental harm and human rights violations throughout global value chains.”

Elsewhere, the European Coalition for Corporate Justice acknowledges the directive as historic but flawed, writing that the law has been “severely weakened by last-minute, deregulatory amendments under the controversial Omnibus I package, slashing key human rights and environmental protections and gutting climate obligations.”

Reuters even headlined its report: “EU countries give final approval to weaken company sustainability laws.”

Marilena Raouna, deputy minister for European affairs for Cyprus, which currently holds the rotating presidency of the EU Council, says:

“With today’s decision, we are delivering on our commitment for a European Union which is more competitive. Through the package adopted, we are reducing unnecessary and disproportionate burdens on our businesses, with simpler, more targeted and more proportionate rules, both for our companies and our citizens.”

Negotiations over the CSDDD began when it was included in the “omnibus” package last year, an effort to simplify human rights due diligence and sustainability reporting contained in the Corporate Sustainability Reporting Directive (CSRD).

‘Regulatory burden’

That followed a report by Mario Draghi, former European Central Bank president, in which he argued both directives were a “major source of regulatory burden”.

CSDDD’s extra territorial effects also drew the ire of US politicians. In November last year, businesses called on US Treasury secretary Scott Bessant to push back on EU law makers, describing the directive as “egregious”.

Both the US and Qatar at one point claimed that CSDDD could threaten trade.

CSDDD is much less ambitious than it once was and campaigners have lost out to politicians eager to cut regulatory burdens on EU companies trading in a much more uncertain world. It remains to be seen whether what is left will still deliver sustainability benefits.