EU Fails to Secure Approval for Proposed Law on Environment, Sustainability, Human Rights Reporting

The European Council has failed to approve proposed legislation on environmental, sustainability and human rights reporting. After several countries, including Italy and Germany, objected to a European Union legislation that would require companies to mitigate their impact on the environment and human rights, the legislation did not receive the European Council’s final approval.

The measure did not secure the EU’s approval even though the EU Parliament and the European Council had previously reached a provisional regulation on the environment, sustainability, and human rights reporting bill.

This will undoubtedly set back the regional bloc’s efforts to achieve its Corporate Sustainability Due Diligence Directive (“CSDDD”). The directive grants the EU four years to advance corporate sustainability regulation starting with implementing findings from 2020 European Commission studies on sustainable corporate governance, supply chain due diligence requirements and the duties of directors.

A proposed CSDDD draft from February 2022 also outlines how corporations are obligated to identify, assess, prevent, address and remedy their negative impacts on the society and environment. This includes everything from environmental emissions, pollution, damage to natural ecosystems and deforestation to child labor and slavery in upstream supply chains as well as downstream activities such as recycling and distribution.

The European Council took its position on the directive in late 2022 before reaching an agreement with Parliament on the CSDDD in December 2023. However, the Council postponed a vote to approve the directive in February after Germany threatened to withdraw support for the legislation due to concerns about its potential legal and bureaucratic impact on companies.

Italy also withdrew support for the directive. A recent last-ditch effort by the council to approve the directive failed at the last minute after France proposed that the rules be scaled back significantly. According to France’s last-minute proposal, scaled-back rules would only apply to companies with more than 5,000 employees rather than the proposed 500 employees. If the proposal is successful, around 80% of businesses would be exempt from CSDDD obligations.

A statement from the Belgian Presidency of the Council said that ambassadors at Coreper put forward the Corporate Sustainability Due Diligence Directive. However, the presidency was unable to find support for the directive despite its best efforts, the statement noted.

The European Council will now consider the current state of matters and determine if it can consult with the European Parliament to address the issues put forward by EU member states.

As different jurisdictions and regional blocs grapple with the complexities of agreeing on uniform environmental, human rights and social impact reporting requirements, it remains up to individual entities such as Coyuchi Inc. to implement practices that engender awareness of the environmental, climate, people and governance impacts of doing business.

NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU

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