European Union countries have today postponed a decision on a proposed law which would require large companies to check if their supply chains use forced labour or cause environmental damage after Germany indicated it would abstain.
A "qualified majority" of 15 EU countries representing 65% of the EU population is needed for the corporate sustainability due diligence directive (CSDDD) to proceed to a final vote in the European Parliament, where politicians are expected to support it.
It was not clear today if a sufficient number of envoys from the 27 EU countries backed the law, with Germany set to abstain.
One EU diplomat said Germany's position might have given other countries cause to re-think.
Once the engine of EU integration along with France, Germany is increasingly becoming the brake, with a divided coalition.
Germany's pro-business Free Democrats opposed the supply chain law, arguing it would burden business with excessive bureaucracy. They also brought late objections to an EU law to end sales of CO2-emitting cars by 2035 and on EU plans to reduce truck emissions.
Their coalition partners, the Social Democrats and the Greens, backed the law and warned that Germany would lose credibility in the EU with their last minute opposition.
The Belgian EU presidency said the item had been removed from the agenda of today's meeting of envoys from the EU's 27 countries and would be rescheduled to a date to be announced.
The EU diplomat said it was set to be next Wednesday.
Under the CSDDD, due to enter force in 2027, large companies in the EU will have to identify and take remedial action if they find their supply chains employing forced or child labour or damaging the environment, such as deforestation.
The rules will apply to EU companies that have more than 500 employees and a net worldwide turnover above €150m and for non-EU firms whose EU turnover is more than that amount, albeit with a three-year lag.
Fines for breaching the rules could be as much as 5% of a company's global turnover.
The law has raised corporate hackles elsewhere, such as the US, because it encompasses about 4,000 companies that do business in the bloc but are headquartered elsewhere.
