EU’s due diligence derailment

As some commentators had feared would happen, European Union national governments have blocked the passage of the corporate sustainability due diligence directive, which requires large companies to check their supply chains for social and environmental risks. The most high-profile opposition was from the fiscally conservative German Free Democratic Party. Failing to receive a qualified majority of 15 out of 27 EU countries, the new rules will not be subject to a final vote in the European parliament, where approval from members was expected. 

Without resolution, the law could be delayed until after the EU parliament election in June. Under the proposed CSDDD, large EU companies would need to address forced labour, child labour and environmental damage in their supply chains. This setback will undoubtedly be met with confusion among businesses awaiting definitive legislation to level the playing field around human rights due diligence. 

The most recent Forest 500 analysis from NGO Global Canopy reveals that, despite a decade of warnings, over half of the world's largest financiers, including major players such as BlackRock, Vanguard and Macquarie, have no public policies or pledges regarding deforestation. The new Forest 500 report evaluates the actions of 350 companies in forest-risk industries and their 150 major financiers, each year. The report criticises 30 finance firms and 39 other companies as continual laggards wilfully ignoring deforestation risks. 

Notably, only 15% of financial firms with deforestation commitments ensure comprehensive coverage across all forest-risk commodities. Leading in this aspect are Schroders, Rabobank and BNP Paribas. Despite some progress, including a decrease in finance businesses without deforestation commitments from 89% in 2014 to 55% in 2024, concerns persist about what Global Canopy calls a “forest blind spot”. Global Canopy emphasises the need for regulation to address these persistent challenges, highlighting the EU’s incoming deforestation regulation as a significant step towards combatting deforestation. 

Renewcell, the Swedish textile-to-textile recycling company famous for its Circulose fibre and supported by fashion giant H&M, has declared bankruptcy citing financial constraints. Despite endeavours to secure funding, discussions with major shareholders, lenders, and potential investors fell short in providing necessary capital for its continued operations. 

Circulose, the company's pioneering product, is renowned for its sustainable approach to recycling cotton waste into high-quality textile pulp. The news highlights the hurdles faced by sustainable innovators in the fashion industry, as science-backed solutions struggle to become profitable, emphasising the crucial role of financial backing in fostering environmental advancements within the sector.

Despite weeks of intense protests from farmers and opposition from right-wing parties, the European parliament has approved a watered-down version of a nature restoration law proposed initially by the European commission in 2022. The law, a crucial element of the EU’s green deal, aims to restore at least 20% of the EU’s land and sea by the end of the decade, with a goal of covering all ecosystems in need of restoration by 2050. 

While some lawmakers, including those from the centre-right European People’s Party, expressed concerns about further burdens on farmers, others hailed the law as a step towards ensuring a habitable environment for current and future generations. The vote, which passed with 329 MEPs in favour and 275 opposed, comes amid escalating concerns about the rapid decline of nature, with 81% of Europe’s natural habitats classed as being in poor health. The policy will now need final approval from EU national governments before it enters into force.