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EU law would target only very large firms

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The law was contested by countries such as the US and

Qatar

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Activists say EU institution uses the environment as a

bargaining chip

By Kate Abnett and Inti Landauro

BRUSSELS, Oct 13 (Reuters) - The European Parliament's

legal committee on Monday backed plans to water down the EU's

corporate sustainability law, which is facing pushback from

companies that say complying with the rules would hinder the

competitiveness of European industries.

The European Union's corporate sustainability due diligence

directive (CSDDD) was adopted last year and requires companies

to fix human rights and environmental issues in their supply

chains, or face fines of 5% of global turnover.

In the vote on Monday, lawmakers in the European

Parliament's legal committee approved proposals that would make

the rules mandatory only for companies with 5,000 or more

employees and at least 1.5 billion euros ($1.74 billion) in

turnover.

Currently, CSDDD applies to companies with 1,000 or more

employees and above 450 million euros in turnover. The committee

also backed dropping a requirement for companies to carry out

"transition plans."

CUTTING COSTS FOR BUSINESS

"The (conservative) European People's Party's goal has

always been to simplify rules and cut costs for businesses,"

said Jorgen Warborn, the lawmaker who drafted the text approved

on Monday. "Our vote today will create more predictability for

our businesses in an unpredictable world."

The committee requested that the European Parliament now

start negotiations on the final rules with EU countries, without

a full vote of the assembly. A group of lawmakers equivalent to

a tenth of the assembly could still decide to force a vote next

week.

Some of the changes already appear likely to pass. EU

countries have already said they support changing the law to

apply only to companies with 5,000 or more employees.

The CSDDD has become one of the most politically contested parts

of Europe's green agenda, with countries including the United

States and Qatar demanding changes. They argue that the EU is

overstepping by imposing requirements on foreign companies.

European companies including TotalEnergies have

demanded that the EU scrap the law entirely, warning it would

hurt the bloc's competitiveness.

But the walk-back has met resistance from some investors and

activists, who say it weakens corporate accountability and hits

Europe's ability to attract investments toward meeting climate

goals.

"If such changes are ultimately adopted, this law will be

stripped of its very purpose for short-term political

convenience," said senior lawyer Amandine Van den Berghe of

nonprofit law firm ClientEarth. "What is a cornerstone of

responsible business in Europe is being turned into a political

bargaining chip."