The Retreat of Corporate Accountability: What the EU’s Weakened Supply Chain Law Signals
Brussels – A pivotal moment has passed in the fight for corporate responsibility. On December 16, 2025, the European Parliament approved significantly weakened amendments to the Corporate Sustainability Due Diligence Directive (CSDDD). This isn’t just a European story; it’s a bellwether for the global trend of corporate accountability, and the signs aren’t encouraging. The original intent – to hold companies accountable for human rights and environmental harms throughout their global supply chains – has been substantially diluted, raising serious questions about the future of responsible business practices.
The Lobbying War and the Erosion of Ambition
The CSDDD’s journey from ambitious proposal to compromised legislation is a stark illustration of the power of industry lobbying. For eight months, companies, particularly those in the fossil fuel sector, waged a relentless campaign to water down the law. Documents reveal a coordinated effort, with US companies even pressuring the EU through trade negotiations. This wasn’t simply about protecting profits; it was about avoiding the potential legal and financial repercussions of addressing systemic issues within their supply chains.
The result? A law that now covers roughly 70% fewer companies – a reduction from 3,363 to approximately 980 EU-based corporate groups. Crucially, the obligation for companies to implement climate transition plans, aligning with the Paris Agreement, has been removed. This is particularly concerning given that the companies still covered by the law are responsible for nearly two-thirds of the EU’s total CO2 emissions.
A Global Trend: Resistance to Accountability
The EU’s experience isn’t isolated. Across the globe, we’re seeing a pushback against regulations designed to increase corporate accountability. In the United States, efforts to establish similar supply chain due diligence laws have faced fierce opposition. Australia has recently debated, and ultimately weakened, its modern slavery legislation. This resistance stems from several factors:
- Cost Concerns: Companies argue that implementing robust due diligence processes is expensive and burdensome.
- Competitive Disadvantage: Businesses fear being at a disadvantage compared to competitors operating in jurisdictions with less stringent regulations.
- Ideological Opposition: Some argue that such regulations represent an overreach of government power and interfere with free markets.
However, the argument that accountability is too costly ignores the immense social and environmental costs of unchecked corporate behavior. Consider the Rana Plaza collapse in Bangladesh in 2013, which killed over 1,100 garment workers. The tragedy highlighted the devastating consequences of prioritizing profit over worker safety and supply chain transparency. Similar incidents, though less publicized, occur regularly across various industries.
The Rise of ESG Backlash and “Anti-Woke” Campaigns
Adding fuel to the fire is the growing backlash against Environmental, Social, and Governance (ESG) investing. Fueled by political rhetoric and misinformation, ESG is increasingly portrayed as “woke capitalism” – a distraction from core business objectives. This narrative has gained traction in the US, with several states pulling investments from companies prioritizing ESG factors. This anti-ESG movement is directly impacting the momentum for corporate accountability laws, as it creates a climate of skepticism and resistance.
Pro Tip: Don’t equate ESG with solely ethical investing. Strong ESG practices are increasingly linked to long-term financial performance, as companies that manage risks related to sustainability and social impact are often more resilient and innovative.
What Remains and Where the Fight Goes Next
Despite the setbacks, the amended CSDDD isn’t a complete failure. Companies will still be required to establish due diligence processes to identify, prevent, and mitigate human rights and environmental risks throughout their supply chains. A proposal to limit due diligence to direct suppliers was rejected, meaning companies will be held accountable for issues further down the chain.
However, the lack of a uniform system for holding companies accountable in EU courts is a significant weakness. Victims of corporate abuses will continue to face significant hurdles in seeking justice. The future of corporate accountability now hinges on several key areas:
- Civil Society Pressure: Organizations like Human Rights Watch and ClientEarth will continue to advocate for stronger regulations and hold companies accountable through litigation and public campaigns.
- Investor Activism: Increasingly, investors are demanding greater transparency and accountability from the companies they invest in.
- National Implementation: The effectiveness of the CSDDD will depend on how EU member states implement the directive into national law.
- Emerging Technologies: Blockchain and AI-powered supply chain tracking technologies offer the potential to improve transparency and traceability, making it easier to identify and address risks.
FAQ: Corporate Accountability in 2026 and Beyond
Q: What is supply chain due diligence?
A: It’s the process of identifying, preventing, mitigating, and accounting for how a company’s actions directly or indirectly impact human rights, the environment, and good governance.
Q: Why is corporate accountability important?
A: It ensures that companies are responsible for the impacts of their operations, protecting workers, communities, and the environment.
Q: What is the role of consumers in promoting corporate accountability?
A: Consumers can support companies with strong ethical and sustainable practices and demand greater transparency from brands.
Q: Will the weakened CSDDD have a global impact?
A: Yes, it sets a concerning precedent and may embolden companies to resist similar regulations in other jurisdictions.
Did you know? The fashion industry is one of the most polluting and exploitative industries in the world. Increased supply chain transparency is crucial to addressing issues like forced labor and environmental degradation.
The retreat of the CSDDD is a setback, but not a defeat. The fight for corporate accountability is far from over. It requires sustained pressure from civil society, responsible investors, and informed consumers. The future of a just and sustainable global economy depends on it.
Explore further: Read our in-depth report on the challenges of supply chain transparency and learn how you can support ethical businesses.
