Spain wants to exclude the financial sector from the CSDD rules

The current Spanish presidency of the Council of the European Union seems to be leaning toward excluding the financial sector from the EU's corporate responsibility rules, which are currently the subject of interinstitutional negotiations. But let's take a step back: what are "accountability rules," and why has the EU Council decided to go down this path?

Euro-Commissioners Thierry Breton and Didier Reynders presented a proposal for a corporate sustainability directive in Brussels on February 23 last year, arguing that a combination of public oversight processes and liability measures would promote more sustainable trade. As such, the 'Directive on Corporate Sustainability Due Diligence' (Directive on Corporate Sustainability Due Diligence, also known as CSDD) would oblige companies to prevent, identify and mitigate human and environmental rights violations in their value chain ('value chain'). Companies would also be required to establish a complaints procedure for victims and to monitor their own measures and those of their suppliers, according to the text of the proposal. The directive thus responds to common public demand across Europe, with more than 500,000 responses in the public consultation process. The goal is to ensure that services and goods used in Europe are provided with full respect for human rights and without harming the environment

In addition, it should be specified that the directive would apply to EU companies with more than 500 employees and a worldwide net turnover of more than 150 million euros. However, for companies active in risky sectors, the limits would be lowered to 250 employees and 40 million euros in turnover. In addition, the Commission argues that many small and medium-sized enterprises (SMEs) will be indirectly affected because they are often part of the value chain of larger companies. Some member states, such as Germany and France, have already introduced national rules in line with the EU guidelines currently subject to negotiation.

So, we come to November 2023. Spain-currently leading the Presidency of the Council of the European Union-proposes to exclude the financial sector from the 'Directive on Diligent Implementation of Corporate Sustainability': this proposal originates from internal divisions among member states, which could jeopardize agreement on the law in its entirety. In their general position adopted in December last year, member states agreed to leave the inclusion of the sector as a national option; this is a move led by France, which continues to strongly support the exclusion of the financial sector from mandatory diligent implementation requirements.

Consequently, to find a compromise solution with the Parliament, the document published by the Council proposes to include a review clause to involve financial institutions at a later stage, accompanied by a political declaration by the three EU institutions to show strong political commitment.

It is already expected that the possible exclusion of the financial sector will undoubtedly elicit criticism from both civil society organizations-who have long called for financial institutions to be held accountable for the impact of their investments on human rights and the environment-and members of the European Parliament. However, according to the published document, if Parliament negotiators fail to agree on the exclusion of the financial sector, discussions would restart in search of other compromise solutions with the Council. All that remains is to await the outcome of the upcoming meetings between representatives of the parties involved to see which position, between the ideological and the pragmatic, will emerge victorious from the EU negotiations.

Translated by Denise Praticò. 

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