France's President Macron aligns with Germany's stance in advocating for the abolition of the EU's Supply Chain Sustainability Due Diligence Law.

In a significant development, the European Parliament and the European Council have decided to delay the implementation of the Corporate Sustainability Due Diligence Directive (CS3D) until 2028. This decision comes as part of the Omnibus process, which aims to reduce the sustainability reporting and regulatory burden on companies.

The CS3D, initially proposed by the European Commission in February 2022, was intended to create a level playing field with the U.S., China, and other companies. The directive applies to upstream supply chains and some downstream activities such as distribution and recycling, addressing impacts ranging from child labor and slavery to pollution and emissions, deforestation, and damage to ecosystems.

However, the implementation of the CS3D has faced opposition, particularly from French President Emmanuel Macron and German Chancellor Friedrich Merz. They have called for the elimination of the CS3D, with Macron framing the move as part of a major push to reduce regulatory and compliance burdens on companies to improve competitiveness.

In May 2024, after a long process that required revisions and significantly scaled back the number of companies covered by the law, the CS3D was adopted. However, France had already called for an indefinite postponement of the implementation of the CS3D before the Omnibus process.

The delayed and scaled-back CS3D will now only apply to companies with more than 5,000 employees, effectively removing roughly 80% of businesses from the CS3D obligations. Changes proposed to the CS3D include requiring full due diligence only at the level of direct business partners, reducing the frequency of monitoring the effectiveness of due diligence from annual to every 5 years, and limiting the amount of information that can be requested from small companies.

The CS3D requires companies to address their negative impacts on human rights and the environment across their value chains. The proposed changes, while reducing the administrative burdens, may raise concerns about the effectiveness of the directive in ensuring corporate accountability and sustainability.

In his speech to business leaders, Macron called not just to simplify the CS3D, but to eliminate the law altogether. His stated reason for eliminating the CS3D is to synchronize with the U.S. and the rest of the world. The delay and changes to the CS3D will be closely watched by businesses and environmental advocates alike, as they navigate the evolving landscape of corporate sustainability obligations.

France's President Macron aligns with Germany's stance in advocating for the abolition of the EU's Supply Chain Sustainability Due Diligence Law.