The new European regulation on the chain of origin, the CSDDD, which was due to be put to a vote on Friday, February 9, has just hit a major obstacle. Germany, the EU’s largest economy and a longtime supporter of integration, said no to the rules, forcing the Belgian EU presidency to postpone the vote. With Italy, which was also expected to abstain, this is enough to freeze the CSDDD.
Ok.
Undoubtedly, regulation is mandatory. Consumer health, economic equity, and environmental sustainability are not natural outcomes of an absolutely relaxed market. We learned this lesson painfully in the early 20th century, when robber barons crushed small businesses, exploited workers, and wreaked havoc around the world. much of the planet. And yet, it’s imaginable to have too many smart things.
The CSDDD includes an overly broad definition of responsibility in the source chain, ranging from labour criteria to biodiversity. It also has twice as much European regulation on carbon labelling, which will come into force in 2026. In addition, it applies to all companies, private or public, whose sales in the EU exceed 150 million euros. If continued as it is, this new regulation would put almost every company currently being promoted in immediate violation.
The German FDP party rightly complains that this is an excessive burden on businesses and that it would hinder growth. They know it. Germany’s economic engine has been running backwards in recent years, as emerging energy prices and slowing foreign industry combine with over-regulation to make life very complicated for the mythical Mittelstand. Companies in the structurally similar Italian economy recognize the same challenge and resist Germans.
Zero100’s source chain visibility knowledge confirms the well-known challenge of seeing what’s happening in 3 or more degrees of a given origin chain. And it’s not for lack of trying. Since Covid, no topic has been hotter on CNBC than corporations’ resilience to supply chain shocks. Technological investments to address this factor naturally also to measure sustainability impacts, so the foundations are now being laid for greater responsibility in the supply chain.
And yet, the heroic efforts of leading Europeans such as Unilever, Haiti and the United States of America.
In addition, enforcing criteria on upstream providers may conflict with the business objectives and local regulations of corporations in countries outside the EU. What is, for example, an adequate maximum working day?Or a moderate minimum age for work? Assuming Brussels knows better, it could end up wiping out the fortune of an employer in Bangladesh or a farmer in Côte d’Ivoire and, in doing so, pushing a circle of relatives to migrate north.
I agree with the intent of CSDDD, but I worry that it will do more harm than good. The collapse of the Amazon-iRobot deal is a warning that has the same regulatory root. EU antitrust regulators, involved in “competition in the robot vacuum cleaner market,” thwarted the acquisition. iRobot has temporarily laid off a third of its employees and is dangerously close to death.
The EU may not care about Boston’s 350 workers, but it worries about the chilling effect this story will have on long-term investment. After scaring away founders, key workers, and venture capitalists, this regulatory intervention will most likely end up with a hose. long-term investments.
This may sound nice to social and environmental activists, but it’s not nice to anyone who expects their people to live and solve our sustainability challenge through cutting-edge technology.
Let’s hit the brakes in this case.
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