The New Imperialism

The EU has approved a new environmental regulation that will impact global value chains. Small businesses will have to bear the brunt

- Ankita Mookherjee

The year is 1813. The British parliament has passed the East India Company Act, which ends the company’s monopoly over trade with India and opens it up to merchants outside London and the Company. The legislation encouraged textile manufacturers to export goods to the Indian market, which led to Indian craftsmen competing with machine-made goods and in the long run, resulted in the elimination of the Indian cotton industry.

Cut to 2024. The European parliament has passed the Corporate Sustainability Due Diligence Directive (CSDDD), a year after another environmental regulation, the Carbon Border Adjustment Mechanism (CBAM) came into force. The two are similar, yet distinct. Both aim to encourage global standards and affect supply chains in different ways.

CBAM, as part of Europe’s “green deal” initiatives, is already a bone of contention between the European Union (EU) and developing countries in Africa and Asia, with the latter accusing the EU of using environmental issues as a cover for trade protectionism. In India industry experts feel that the onus of net-zero ambitions should not fall on developing economies which need practical and equitable emission targets to continue on their growth trajectory.

Though these are still early days of CSDDD there are apprehensions that its consequences will be like that of CBAM.

New Laws of Nature

The CSDDD came into force on July 25, establishing mandatory human rights and environmental obligations for companies’ operations and supply chains and aiming to ensure that businesses are accountable for the impact at each point of their value chain. The regulation extends to the EU as well as non-EU companies that have an annual turnover of €450mn in the EU.