The EU has long been the leading edge of sustainability policy – though some might quibble with their approach. But in recent months, European ESG policy has encountered growing opposition and may have just reached its peak.

This week, one of the EU’s most comprehensive sustainability regulations, The Corporate Sustainability Due Diligence Directive (CSDDD), failed to pass after several attempts. The policy would require companies to identify environmental and social issues in their value chains and take steps to improve them.

A last-minute French proposal to change the threshold from companies with over 500 employees to over 5,000 employees would have reduced the burden by more than 80% but still did not sway the vote. Germany, Italy, and 11 other EU member states abstained, and one voted no, effectively killing the policy.

Campaigners called the lack of support “deplorable,” Uku Lilleväli , of the WWF’s European Policy Office said, “EU governments’ last-minute sabotaging and postponement of this new rulebook not only disregards the lives, communities, and ecosystems affected by destructive business practices but also deals a blow to the EU’s credibility as a legislator,”

The current EU presidency (Belgium) has two weeks to rescue the policy, after which it cannot be resuscitated until after the June election and will likely die of natural causes. The Belgian presidency said, “We now have to consider the state of play and will see if it’s possible to address the concerns put forward by member states, in consultation with the European Parliament.”

A watered-down nature restoration law did pass despite farmer protests against it and a last-minute attempt from right-wingers to sink it. The rule aims to restore at least 20% of Europe’s land and air by 2030. However, this rule still needs to go through a round of voting in the EU Council, where the CSDDD failed.

The failure of the CSDDD and the softening of the nature restoration law point to regulatory fatigue setting in amongst Europeans. The farmer protests, which raged in Brussels this week and tied up traffic in Paris in past weeks, add to concerns that the upcoming June elections in the EU will slow down or turn back the EU’s Green Deal. 

This Smart Read article is contributed by Tim Mohin, Global Sustainability Leader, BCG. Every week ESG News delivers smart commentary from ESG practitioners and experts to unpack issues of the week. Submit your ESG Smart Read to [email protected]