Member states might exclude investment firms from CSDDD – EURACTIV.com
As EU member states are trying to find a common position on the bloc’s Corporate Sustainability Due Diligence Directive (CSDDD) ahead of a Council meeting on 1 December, a compromise proposal seen by EURACTIV shows that investment companies would not fall under the scope of the directive in the latest version of the text.
However, other financial actors like banks and insurers would still be covered by the directive, which aims to force large EU companies to ensure that no violations of human rights and of international environmental standards happen along their value chains.
In the European Commission’s original version, proposed in February, all large financial companies were within the scope of the directive. According to multiple EU sources, the exclusion of investment funds was a key interest of both Ireland and Luxembourg, where many investment companies are based.
The compromise text seen by EURACTIV explicitly limits the scope to lending, provision of guarantees and commitments, insurance and reinsurance activities of financial undertakings, thus leaving asset managers like BlackRock and other equity investors largely outside the scope of the directive.
Currently, EU member state negotiators are trying to agree on a common text, a so-called ‘general approach’ for the CSDDD that they can later defend in negotiations with the European Parliament.
And time is short: the issue has been put on the agenda of next week’s Competitiveness Council, where the industry ministers of EU member states meet.
“Our goal is to reach a general approach at the Council,” a representative of the Czech presidency of the EU Council told EURACTIV.
The heads of EU member state delegations will meet on Friday to try to iron out the final issues ahead of the ministers’ meeting.
“Chain of activities” instead of “value chain”
The latest compromise text put forward by the Czech Council presidency would exclude investment funds from the scope of the CSDDD, and also propose a solution to the fight over whether the directive should apply only to a company’s supply chain or its entire value chain. The latter would include everything that happens after a product is produced and sold.
A last-minute push by France, Italy, Spain, Portugal, and Poland last week to limit the scope of the CSDDD to the supply chain meant that the negotiators could not settle on the value chain approach.
The newly proposed compromise text now makes no mention of either the value chain or the supply chain but refers to a “chain of activities” that encompasses a company’s supply chain as well as “the distribution, transport, storage and disposal of the product.”
This is a wider scope than the supply chain approach that France and other countries are pushing for, but it is also a more narrowly defined scope than if the CSDDD were to be applied to the entire value chain.
It could thus be an acceptable middle ground for the conflicting views.
As this text is only a preliminary compromise proposal, the final agreement among member state governments can yet diverge from it.
[Edited by Zoran Radosavljevic]