• The EU’s CSDDD targeting corporate supply chain abuses stalled due to insufficient support from member states.
• Germany, France, and Italy opposed the directive, fearing excessive bureaucracy and increased business liability.
• The directive’s failure marks a setback for EU environmental and social governance efforts.

The European Union’s proposed legislation aimed at addressing human rights and environmental abuses within corporate supply chains has encountered significant obstacles, leading to a stall in its progress.

The Corporate Sustainability Due Diligence Directive (CSDDD), a key piece of the EU’s environmental, social, and governance (ESG) efforts, failed to secure the necessary majority vote from member states, as detailed in recent reports from Reuters and Global Trade Review.

The CSDDD, which was initially agreed upon provisionally between the European Parliament and the Council, aims to mandate large companies to scrutinize their supply chains for instances of forced labor, child labor, and environmental harm, such as deforestation.

The directive targets EU companies with over 500 employees and a net global turnover exceeding 150 million euros.

However, the directive faced significant resistance, primarily led by Germany, France, and Italy. German opposition, spearheaded by the Free Democrats party, centers around concerns that the directive could impose excessive bureaucratic strain on businesses and increase liability risks due to broad definitions of supply chains.

This opposition has led to a deadlock, with Germany’s stance particularly influential, considering its historical role as a proponent of EU integration.

The failure to pass the directive has been labeled a “deplorable setback” by a coalition of 136 campaign groups, underscoring the widespread public support for the CSDDD and highlighting the disappointment over the stagnation of efforts to enhance corporate accountability and protect human rights and the environment.

The contentious nature of the directive and the lack of consensus among EU members suggest that the CSDDD could face significant alterations or delays, especially with the upcoming EU parliament election in June.

The law’s future remains uncertain, as stakeholders, including environmental and human rights groups, express frustration over the impasse.

This development comes at a critical time for European climate commitments, with the European Commission recently recommending a target of reducing net emissions by 90% by 2040.

The stalling of the CSDDD reflects broader tensions within the EU regarding the balance between environmental and social goals and the economic burdens placed on companies.

As the EU assesses its next steps, the fate of the CSDDD and its potential impact on global supply chains and corporate practices remains in limbo, highlighting the challenges of implementing widespread regulatory changes aimed at fostering sustainability and ethical business conduct.

• Survey finds over half of UK exporters (55%) affected by Red Sea disruptions.
• Businesses experiencing substantial delays, with costs soaring up to 300%.
• Urgent government action urged to support affected firms and safeguard economy.

A survey by the British Chambers of Commerce’s (BCC) Insights Unit has revealed that more than half of British exporters (55 percent) are facing supply chain disruptions as a result of Houthi attacks in the Red Sea.

Just over half (52 percent) of manufacturers and business-to-consumer firms who responded to the survey said they’d been affected, while over a third of overall respondents (37 percent) said they’ve been affected by the attacks.

The survey highlighted an issue with supply chain delays. Businesses said disruptions had added three to four weeks to their delivery times.

The report also uncovered a spike in costs, with respondents citing rises of up to 300 percent for shipping container hire.

Discussing the report, William Bain, Head of Trade Policy at the BCC said: “… our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build.

“Certain sectors of the economy are obviously more exposed to this than others. But with the recent introduction of the Government’s new customs checks and procedures for imports also adding to costs and delays, it is a difficult time for firms.

“The UK economy saw a drop in its total good exports for 2023, and with global demand weak, there is a need for the Government to look at providing support in the March Budget.

• Rolls-Royce sees significant financial gains in 2023: £1.6B operating profit, £1.3B net debt reduction
• Erginbilgiç’s strategic vision drives transformation, despite continuing macroeconomic challenges
• Group forecasts further profit increases, maintains confidence in facing future headwinds

Rolls-Royce reported an underlying operating profit of £1.6 billion in 2023, a 143 percent increase from £652 million in 2022. Meanwhile, the company’s revenue increased by 21 percent to £15.4 billion.

The company announced a record-breaking free cash flow of £1.3 billion, fueled by robust operating profit and the sustained expansion of its long-term service agreement (LTSA) portfolio.

The group’s return on capital more than doubled, reaching 11.3 percent, while net debt decreased to £2 billion, down from £3.3 billion at the close of 2022.

Shares of Rolls-Royce have surged by over 200 percent in the past year, making it a top performer on the UK’s blue-chip index, with company shares up 8.79 percent since the results were announced.

“A burning platform”

These results come under the leadership of Tufan Erginbilgiç who became the CEO of Rolls-Royce in 2023. In a press release on Thursday, Erginbilgiç commented on the results. He said:

“Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives. This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.

We are managing the business differently and our significant performance improvement in the year reflects the hard work and focused actions of all our teams. We are also continuing to invest to drive future sustainable growth.

Our strong delivery in 2023 gives us confidence in our 2024 guidance and is a significant step towards our mid-term targets. We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.”

Erginbilgiç assumed his role in January 2023, having inherited a company grappling with significant challenges, particularly in the aviation sector due to the fallout of pandemic-induced travel restrictions.

Shortly after joining the company, Erginbilgiç delivered a sobering assessment of the company’s performance during an address at its UK manufacturing site in Derby, “We do have a burning platform,” he said.

Erginbilgiç’s language evoked a stark analogy famously used by former Nokia CEO Stephen Elop in 2011. Following Nokia’s dramatic loss of market share against Apple and Samsung, Elop likened Nokia’s predicament to that of a worker on a burning oil platform in the North Sea, faced with the prospect of jumping into freezing waters to survive.

Short-term pain for long-term gains

In response to the Rolls-Royce’s challenges, Erginbilgiç implemented a comprehensive restructuring and cost-cutting program aimed at enhancing efficiency and profitability.

One of the most significant changes he introduced was a firm stance on price, even if it meant missing out on opportunities.

In a December 2023 interview with Bloomberg, Erginbilgiç commented on the strategy. He said, “I’m not actually interested in short-term gains, I would run this very differently if it was about a couple of years.”

“I’m very interested in Rolls-Royce being remunerated for the investments we make and the risks we take, and that needs to be fair.” He further commented.

British construction firms expressed their highest level of optimism in two years, buoyed by expectations of interest rate cuts that could potentially revitalize the sector, according to a survey released Tuesday (Feb 6).

The S&P Global/CIPS UK Purchasing Managers’ Index, a key measure of activity in the construction industry, climbed to 48.8 in January from 46.8 in December, marking its most robust reading since August 2023, albeit still indicating stagnation.

Economists surveyed by Reuters had anticipated a more modest increase to 47.3.

Tim Moore, Economics Director at S&P Global Market Intelligence, noted that customer demand appeared to be on the cusp of improvement as the economy rebounded from a sluggish end to 2023.

From 00:01 on Wednesday 31 January 2024, the UK government will implement the first phase of its new Border Target Operating Model (BTOM) policy. The new post-Brexit policy will impose new sanitary and phytosanitary controls on food and plant imports from the EU.

Under the policy, all plant and animal products imported from the EU will be categorized as low, medium or high-risk. Items categorized as medium and high risk, such as meat, dairy products and the majority of plants, will be subject to inspections conducted by plant health inspectors or veterinarians.

The additional checks introduced in January are the first of three phases of new importer requirements expected to impact UK supply chains in 2024. The BTOM policy is expected to introduce physical checks in April and additional security and safety declarations from October.

The policy was delayed for a fifth time in August 2024, with the Prime Minister’s official spokesperson saying the delay was the result of the UK government listening “to the views of the industry”. The UK government has claimed the policy will create a “world-class new digital border” and “ensure the smooth flow of goods and maintain strong security and biosecurity controls”.