Deregulation Passes

The European Parliament (EP) voted to reduce requirements for companies to monitor and report on labor conditions and environmental damage in their supply chains.

Context

The EU adopted the Corporate Sustainability Due Diligence Directive (CSDDD) in 2024, requiring companies to track issues like child labor, unsafe working conditions, and environmental harm throughout their operations. The directive originally applied to companies with at least 1,000 employees and €450M in annual revenue, while separate reporting requirements covered additional businesses. Companies violating these rules faced potential fines of up to 5% of global revenue.

Shifting Dynamics

The regulations prompted criticisms from businesses and conservatives, who alleged that they were burdensome and made EU companies less competitive, and on Thursday, the EP voted 382-249 to reduce the CSDDD regulations.

The new version raised thresholds so that only companies with at least 5,000 employees and €1.5B in annual revenue must comply, exempting more than 90% of originally covered companies.

Requirements Change

The legislation also eliminated requirements for companies to produce plans for reducing their carbon emissions and removed mandatory reporting on labor and environmental practices for most businesses.

Supporters said the changes would save companies an estimated €5B annually in compliance costs and address concerns from countries including the US and Qatar about potential disruptions to European gas supplies.

Reactions

Many on the left opposed the vote, with one Green Party member describing it as "a sad moment for our European values." Critics said the changes would make it easier for companies to relocate production to countries with poor labor and environmental protections.

The shift comes as France and Germany push for even further reductions to the rules.