After more than two years of planning, the EUs Corporate Sustainability Due Diligence Directive (CSDDD) failed to pass in the recent vote. According to Reuters and the South China Morning Post on the 28th, with 13 member states including Germany and Italy abstaining and Sweden opposing, this important bill aimed at enhancing corporate responsibility and protecting human rights failed to secure the necessary majority support.

Although the Supply Chain Act does not directly target China, it will require major enterprises within the EU to conduct detailed due diligence on business partners in third countries. Given Chinas status as the EUs second - largest trading partner and its important position in the supply chain, the implementation of this act will undoubtedly have a significant impact on Chinese enterprises.

The rotating presidency of the Council of the European Union, Belgium, stated after the bill failed to pass that it would continue to consult with the European Parliament on the concerns of member states. However, the Forbes website pointed out that the Council of the European Union is under time pressure, with only two weeks to come up with an alternative plan, and the possibility of passing the bill before March 15 is extremely slim. As the European Parliament elections approach, the future of the bill is full of uncertainties and it has virtually ceased to exist.

The Supply Chain Act was proposed by the European Commission in February 2022. The aim is to integrate sustainable development goals such as human rights and the environment into global business activities and corporate supply chains, ensuring that EU companies maintain a competitive edge in the global supply chain. The bill aims to regulate enterprises in the supply chain and mandatorily disclose information, and its scope of influence is expected to extend to third - country enterprises that meet regulatory conditions.

The bill would apply to EU companies with over 500 employees and global net revenues exceeding €150 million, requiring them to identify and address potential forced labor, child labor, or environmental damage in their supply chains. Violators could face fines up to 5% of global sales. Additionally, the rules plan to expand coverage after three years to include non-EU companies with net revenues over €150 million in EU countries.

Germanys stance has had a decisive impact on the future of the bill. As early as January this year, when the draft of the Supply Chain Act was released, Germany clearly stated that it did not support this bill, and its refusal may have foreshadowed the result that the bill failed to pass.

With the suspension of the Supply Chain Act, the EUs legal framework for corporate due diligence remains in an uncertain state. In the future, the EU and its member states will need to find new ways to balance corporate responsibility and market freedom, while taking into account the reactions and cooperation attitudes of international trading partners.