Sweden’s CSDDD U-turn crucial step forward

 

The imminent final approval of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is a significant moment for human rights and environmental protections in business – but no one can deny the path to adoption was twisted and torturous.

The European Parliament’s latest approval, paves the way for EU Member States to green light a law in Council which would obligate companies in scope to identify and address human rights and environmental harms connected to their activities. In a remarkable turn of events, Sweden has come around to endorse the directive. Ahead of pivotal EU Council meetings on 15 and 24 May, this confirms that support amongst Member States to formally adopt it has never been broader.

The curious case of Sweden

Sweden’s attitude during the CSDDD negotiations has been one of many twists and turns. Whereas the previous government generally supported the idea of mandatory due diligence, Sweden’s current centre-right coalition has been much more sceptical. This became evident when the Council negotiated its approach ahead of trilogue discussions with the European Commission and Parliament. During one meeting in December 2022, Sweden’s Minister of Industry Ebba Busch expressed her preference for legislation that reduced the administrative burden on companies, stuck to the concept of “supply chain” as opposed to “value chain”, limited company scope and omitted civil liability. The government nonetheless backed the Council’s negotiating position in good faith, despite it not addressing all of its reservations.

This diplomatic position fell apart shortly after co-legislators  reached a political agreement in trilogue negotiations, with media reporting Sweden was isolated as the only member state intending to vote against the deal, alongside some of its peers which planned to abstain from voting. Swedish NGOs, unions and academics unanimously called the move “deeply unfortunate and surprising”, while also at odds with the government’s earlier backing of the Council’s position and a 2018 recommendation by the Swedish State Treasury to harmonise business requirements with the UN Guiding Principles on Business and Human Rights. A communication from the Swedish Institute for Human Rights implored the government to reconsider its stance.

Swedish businesses leading the way

Equally puzzling was the clear disconnect between Sweden’s attempt to safeguard its industry from overregulation and Swedish businesses favouring common rules on corporate sustainability. Indeed, it was precisely the absence of regulatory oversight which for decades had given unscrupulous companies a competitive advantage over those trying to adhere to voluntary principles on business and human rights. If anything, the CSDDD offered companies a unique opportunity to level the playing field, building on established best practice.

Prominent Swedish companies repeatedly voiced their support for the CSDDD. IKEA, Volvo Cars Group and Ericsson, among others, urged the government to enact a directive in line with international normative frameworks. In April 2024, Scania, H&M Group and Axfood reminded decision-makers the directive “fosters collaborative approaches on sustainability between business partners”, hailing its implementation as “manageable”.

The final U-turn

When on 15 March EU ambassadors finally agreed on a weakened compromise – the law now only applies to companies with more than 1,000 employees and an annual turnover of over €450 million as opposed to the previously agreed 500 employees and €150 million – Sweden surprisingly refrained from casting a “no-vote” but instead abstained from voting. Perhaps the multi-stakeholder pressure and critique from opposition parties had something to do with this; just days before the COREPER deal the minister’s mandate to vote no had been challenged in a parliamentary debate.

Fast forward to 21 March. When asked about its position on the CSDDD at a parliamentary committee meeting, the minister’s State Secretary declared that “with the changes made in the final stages of the negotiations (…) the compromise text, on the whole, moved in such a positive direction in terms of the Swedish position that Sweden can support it”. Sweden is thus about to adopt a law which includes elements it initially opposed. While the reduction of the company scope to only very large undertakings presumably satisfied the government, other parts it hoped to see deleted – such as civil liability and downstream due diligence – remain present in the text. Its acceptance of civil liability in particular marks a key win for rights holders, as this will enable them to hold companies responsible for human rights and environmental harm.

In its national action plan on business and human rights, Sweden set out a clear expectation that companies must comply with internationally recognised frameworks. It appears that the government is now finally upholding this commitment. But more importantly, Sweden’s support demonstrates there is a decisive affinity within the Council to once and for all hold companies accountable.

Mathieu Vervynckt is Head of Unit for fair and responsible value chains at Swedwatch, a Swedish independent, non-profit research organisation striving to empower rights holders and to promote responsible business practices.

 

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Mathieu Vervynckt, Head of Unit Value Chains, Swedwatch
+46 (0)76 550 32 38
mathieu@swedwatch.org