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Supply Chain

EU Countries Block Supply Chain Audit Law At Last Hour

By Reuters
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EU Countries Block Supply Chain Audit Law At Last Hour

European Union countries blocked at a late stage new rules requiring large companies to check if their supply chains use forced labour or cause environmental damage, following vocal German opposition.

A 'qualified majority' of 15 EU countries representing 65% of the EU population had been needed for the corporate sustainability due diligence directive (CSDDD) before a final vote in the European Parliament, where lawmakers were expected to support it.

Excessive Bureaucracy

On Wednesday (27 February), not enough envoys from the 27 EU countries backed the law for it to proceed, with opposition led by Germany's pro-business Free Democrats (FDP), part of the three-party governing coalition, who argued it would burden business with excessive bureaucracy.

Some 13 EU members abstained and one voted against, an EU diplomat said.

This was the second time Belgium, which holds the rotating EU presidency, had tried to secure backing for a text already agreed with the European Parliament. Earlier this month, it withdrew it from the agenda at the last minute after Germany and Italy indicated they would abstain.

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Belgium said it would assess if it was possible to address EU members' concerns, in consultation with the parliament. Without a breakthrough in about two weeks, the law could be put on hold until after the EU parliament election in June, casting doubt on its future.

Germany, once the engine of EU integration with France, has already criticised an EU law to end sales of CO2-emitting cars by 2035 and on EU plans to reduce truck emissions.

Supply Chain Audit Law

Under the CSDDD, designed to enter force in 2027, large companies in the European Union would have to identify and remedy in their supply chains cases of employing forced or child labour or environmental damage, such as deforestation.

A group of 136 campaign groups said in a joint statement the blockage was a 'deplorable setback', orchestrated by Germany's FDP and hit by a last-minute attempt by France to propose a 10-fold increase in the employment threshold.

The rules are to apply to EU companies that have more than 500 employees and a net worldwide turnover above €150 million.

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