A landmark piece of Brussels’ ambition to put a greener and more human face on international business cleared a major hurdle on Friday — but not without taking major hits along the road. 

Overcoming weeks of pushback from national capitals, European Union ambassadors gave their green light to proposed business supply chain oversight rules, which would require companies in the bloc to police their value chains for human rights and environmental violations.

Dutch lawmaker Lara Wolters of the Socialists & Democrats, who leads work on the file in the European Parliament, hailed the approval by member countries as a long-overdue “victory in the fight to hold companies responsible for people and the environment.”

Despite the “cynical games” played by European leaders such as French President Emmanuel Macron, Italian Prime Minister Giorgia Meloni and German Finance Minister Christian Lindner, “the Belgian Council presidency has successfully overcome the blockage of member states,” Wolters added. 

The Belgian presidency of the Council of the EU managed at the last minute to stave off an attempt by countries — initially spearheaded by German liberals — to bury the measure completely. But the compromise came at a high price.

The presidency this week suggested a series of tweaks to water down the text and win over the waverers. 

According to the final text agreed on Friday, the rules will apply to companies employing upward of 1,000 people with annual sales of €450 million. That's up from firms with at least 500 employees and turnover of €150 million, as initially suggested in a deal clinched by EU negotiators in December.

“Last-minute horse-trading means the law will now only cover a small number of companies, falling short of its initial aim to tackle the full breadth of companies’ environmental footprint,” said Anaïs Berthier, head of the NGO ClientEarth’s Brussels office.

The text also suggests deleting any reference to high-risk sectors which, in previous versions of the text, would have been subject to more stringent due diligence obligations. Supply chain oversight obligations would no longer apply to the disposal of products, as initially envisaged. 

With its tweaks, the presidency managed to appease key holdouts, including Italy and France. Germany, along with smaller countries including Bulgaria and Sweden, abstained in the vote.

Rome had linked its support for the rules to demands on separate packaging legislation, which was approved earlier on Friday. Having obtained further concessions on the packaging rules, Rome voted in favor of the revised supply chain file.

“We have shown in Brussels that there is an Italy that does not give in to solutions that penalize our industry, but is capable of continuing to negotiate to the end in a decisive manner, making the case for the goodness of its arguments, valuing our excellence and managing to substantially change the final result,” Meloni said in a statement.

Rocky road

Friday’s green light follows years of thorny talks on a heavily lobbied and controversial file. 

When the text was initially drafted by the European Commission, corporate lobbyists scored a first big win when the EU executive was forced to delay its initial proposal. The file was also moved from the exclusive preserve of Justice Commissioner Didier Reynders to be shared with Internal Market Commissioner Thierry Breton, a former executive in several top French boardrooms.

Once the Commission eventually presented a text in February 2022, nearly two years of negotiations followed. EU negotiators finally sealed a deal in December — and, just as the deal crossed the finish line, France won a carve-out for financial institutions.

Big business was quick to argue that the law is not workable.

“The approval of the EU supply chain law is a further setback for Europe's competitiveness and creates new obstacles to security of supply and diversification of the European economy,” Siegfried Russwurm, president of the Federation of German Industries (BDI) said following Friday's vote.

That’s despite the fact that Germany has already passed its own supply-chain law, and having one in force at EU level would level the playing field for the companies that power Europe’s largest economy.

The supply chain rules still need approval from the European Parliament before they can enter into force. Lawmakers in the legal affairs committee are due to vote on the file next week, while the Parliament’s plenary is expected to sign off in April.

Earlier this week, countries signed off on the EU’s ban on products made with forced labor, a measure that goes hand-in-hand with the supply chain rules, and that seeks to target labor abuses in China more specifically.

Giovanna Faggionato contributed reporting.