After a four-year-long battle, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) was finally approved by EU member states in May of 2024. This directive requires large companies to identify and mitigate human rights and environmental abuses not only within their own operations but also among their business partners in their “chain of activities.” It calls for member states to issue administrative penalties and allows for civil liability claims if companies breach these obligations. The negotiation of the CSDDD was marked by intensive business lobbying, with some segments of the business community attempting to weaken or block the directive, while others publicly supported it. Because the CSDDD builds on the pioneering French Duty of Vigilance law of 2017, it is particularly interesting to ask how the French business community has responded. Have they welcomed or resisted the establishment of EU wide rules?

Since large French companies are already required to exercise vigilance over human rights abuses in their supply chains, one might expect them to have supported the CSDDD. After all, without the CSDDD, large companies in France could face civil lawsuits over supply chain abuses that their competitors from Spain, Sweden, or Germany could avoid.  With the CSDDD, French firms could force their European competitors to bear similar costs and risks, and therefore “level the playing field” when it comes to supply chain responsibilities. For French companies that had invested heavily in due diligence procedures, the CSDDD could be a way to force new costs onto both foreign firms and domestic laggards.

In practice, French firms and industry associations rarely acted this way. In our research on the CSDDD, we have begun to document the various positions that firms in France (and elsewhere) took and why they so rarely saw the EU directive as an opportunity to “level up” the playing field.

L’avant-garde et l’arrière-garde

There certainly were some large French firms that publicly supported the CSDDD—including Danone, L’Oreal, and Engie.  These companies generally argued that they had already invested in voluntary sustainability standards and had prior experience in tracing and mitigating problems in their supply chains.  So for them, an EU-wide policy would not be threatening and might provide competitive advantages.

But the broader French business community—and the associations that represented it—seemingly wanted to revisit and weaken the Duty of Vigilance law rather than pushing their competitors to face similar requirements. The two major business associations, Mouvement des Entreprises de France (MEDEF) and Association française des entreprises privées (AFEP), played key roles in representing the French business community, and both expressed grave concerns about the CSDDD. As one business advisor explained it, they “have a very strict [that is, narrow] interpretation of the French law. And they want to just have the same interpretation of obligations at the EU level” (interview, Nov. 2023). Or, as another interviewee reported, some French businesses were “still hoping that we [they] can get the Duty of Vigilance abolished” (interview, Jan. 2024). Amidst a last-minute set of negotiations to save the CSDDD in February 2024, MEDEF called it an “openly repressive approach” that “seriously hampers European competitiveness.”

Exclusions and Thresholds

Among the key concerns of the French business community was the CSDDD’s inclusion of the financial sector—and especially the “downstream” investments of financial firms. While some banks in other countries were amenable to this, pressure from French businesses was instrumental in ultimately getting financial firms’ downstream activities excluded from the scope of the CSDDD. Given the French government’s hope of wooing financial firms to come to Paris, it is perhaps not surprising that they endorsed the idea that financial firms should not be required to police their downstream clients. Interestingly, though, the Duty of Vigilance law contains no such exemption for financial firms. So this can be seen as an attempt to renegotiate and lower the ambitions of the existing national law rather than pushing it onto others.

A second way in which the French business community shaped the final version of the CSDDD pertains to size thresholds. The European Commission’s initial proposal for the CSDDD covered companies with at least 500 employees and 150 million Euros in turnover (or lower for high-risk sectors), but this was quite distant from the threshold of the Duty of Vigilance law, which applies only to companies with at least 5000 employees. French businesses expressed concerns about the consequences for SMEs and the stricter standards for “high-risk” sectors. The size thresholds were not a major point of contention during most of the CSDDD’s negotiation, but at the last minute, when the CSDDD was stalled in early 2024, the French government suggested a dramatic increase to a 5000-employee threshold. The final compromise moved in this direction, making the CSDDD initially applicable only to companies with at least 1000 employees or 450 million Euros in turnover.

With these changes in place, the French government voted for the final version of the CSDDD, rather than abstaining, as Germany, Austria, Belgium, and seven other countries did. Yet the CSDDD had changed significantly in the 18 months leading up to that final vote, in no small part due to positions in France.

A Second Chance

What should we make of these findings about French business responses to the CSDDD? First, they reveal that there were important differences and divisions within the business community. The small number of high-profile firms that expressed support for the CSDDD seemingly saw the EU directive as a way to harmonize expectations and prevent irresponsible competitors from gaining ground. Notably, they joined a transnational coalition with businesses outside of France (often organized by civil society organizations) rather than joining with their national business associations, which were far more critical of the CSDDD. These more conservative business associations were also more influential in shaping the position of the French government.

Second, the French case suggests that companies are not only likely to seek alignment between national and supranational legislation but may also use the tension between the two as an opportunity to renegotiate elements of domestic policy that are perceived as overly burdensome. French banks lobbying to exclude the financial sector is a clear example of an attempt to renegotiate the French Duty of Vigilance law. In addition, one element of the CSDDD that was appreciated in the French business community was that it could provide predictable administrative oversight, rather than the uncertainty surrounding French courts’ interpretation of the Duty of Vigilance Law.

In this sense, the CSDDD represents neither an overall leveling-up nor a lowering of regulatory standards. Instead, it represents a renegotiation—a second chance for business actors to influence policy and shape norms of corporate accountability at both national and regional levels. While French businesses failed to block the Duty of Vigilance law in 2015-16, they will now get a new law as the CSDDD is transposed into national governance throughout the EU.