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Abstention Threatens CSDDD

Germany and other states could refrain from voting later this month, undermining the EU’s credibility as a sustainability leader.  

Industry members, including ShareAction, have warned that the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) risks being hijacked by abstentions from member states in an upcoming voting session.  

Although CSDDD is “too big to fail”, further revisions risk creating an uneven playing field, the NGO warned, as they could lead to individual states formulating their own legislation. This, in turn, could result in a lack of harmonised rules. 

“I find it hard to conceive a scenario where CSDDD is not finalised, be it before or after the European elections,” contended Pietro Cesaro, Policy Advisor on EU Sustainable Finance at think tank E3G. 

CSDDD aims to enhance environmental and human rights protections in the EU and globally. It applies to large companies – designated as entities with more than 500 employees and a net worldwide turnover of €150 million (US$164.9 million) – and targets actual and potential adverse impacts across their operations and supply chains. 

Although the financial sector will be temporarily excluded from the full scope of the directive, a review clause for future inclusion is pending. The full scope of the CSDDD rules is due to be implemented by 2026.  

Losing face, losing time 

A CSDDD approval vote for EU Ambassadors is currently scheduled for 9 February, while the EU Parliament’s voting session will take place on 12 or 13 February. A plenary vote will then follow on 10 or 11 April. 

Germany is considering abstaining from the vote due to internal political pressure, particularly from the country’s liberal Free Democratic Party. The German government has not yet reached an agreement on its position, and if it fails to do so, the internal rules of its coalition would see the country abstain automatically. 

Given EU Council approval requires support from 15 or more member states, representing at least 65% of the EU population Germany’s abstention raises the risk of not meeting that threshold. This, in turn, could encourage other nations to abstain or vote against the text. 

Germany has already significantly weakened the draft law and ensured its priorities were reflected in the deal,” said Uku Lilleväli, Sustainable Finance Policy Officer at the EU branch of the Worldwide Fund for Nature.  

Smaller EU countries including Czech Republic, Estonia, Finland and Sweden have previously flagged concerns and could vote against the deal, while other reports have suggested the majority threshold is likely to hinge on Italy. 

“It’s really striking to see Germany, one of Europe’s leading economies, sway on such game-changing legislation,” Isabella Ritter, EU Policy Officer at ShareAction, told ESG Investor. “Given the EU wants to present itself as a leader when it comes to sustainability and the protection of human rights and the environment, this would seriously undermine its credibility and reputation.” 

Germany would “lose face” if it were to cast an abstention next week, Ritter argued, adding that many companies’ preparation for CSDDD was already underway. Some have been reaching out to the EU Commission to express support for the legislation, welcoming the legal certainty and clarity it offers, she said. 

“We can’t lose more time, and this is the make-or-break moment for CSDDD,” Ritter added, “If Germany’s internal political struggles play a part in hijacking this law, it would really undermine the EU’s credibility and reputation, especially when it comes to sustainability matters.” 

Smoke and mirrors 

Contrary to recent media coverage, the financial sector’s temporary exemption from downstream due diligence under CSDDD remains unchanged. The European Commission is expected to present a review report on the expansion of due diligence rules for the financial sector at the latest in 2026.

“Two years is a reasonable and necessary timeframe,” Ritter said. “It’s really the bare minimum because this was such a huge concession that will have major impacts and far-reaching consequences.” 

The general review of the CSDDD legislation, which will aim to ensure the directive is still up to date and fulfils its purpose and objectives, will not take place for at least six years. 

If the CSDDD text is reopened for revisions, some of the elements may be watered down. For instance, the review clause could come into effect after three or four years, instead of the maximum of two years currently planned, Cesaro suggested. 

Ultimately, there are no guarantees that financial activities will eventually be included in the full scope,” Lilleväli agreed. 

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