This week (28th Feb), the European Union member states rejected a proposed directive that would have mandated companies to conduct supply chain audits to detect forced labor and environmental harm. The potential impact of this directive on the solar PV industry, which has faced accusations of forced labor in the manufacturing of polysilicon and other upstream components, could have been significant.

According to a Wednesday report by Reuters, the Corporate Sustainability Due Diligence Directive (CSDDD) encountered resistance, primarily spearheaded by Germany’s Free Democratic Party (FDP), and fell short of the required “qualified majority” of 15 votes needed for its approval. Consequently, the directive would have proceeded to a vote in the European Parliament.

Scheduled for implementation in 2027, the Corporate Sustainability Due Diligence Directive (CSDDD) is tailored to affect EU enterprises with more than 500 employees and a global turnover exceeding €150 million (US$162 million). Under this directive, companies would be mandated to scrutinize their supply chains and relay findings to designated national bodies overseen by the European Commission.

As per Reuters’ coverage, the FDP expressed concerns that the CSDDD would impose excessive bureaucratic obligations on businesses.

Solar supply chains

Responding to a query from PV Tech regarding this matter, Anett Ludwig, who serves as the head of supply chains at the PV trade association SolarPower Europe, emphasized the importance of reaching an agreement among member states within the current mandate. Ludwig stated, “The CSDDD will contribute to maintaining legislative alignment with the Forced Labor Ban, serving as crucial instruments in upholding European sustainability principles. Furthermore, companies require legal clarity to adeptly and effectively address their compliance obligations.”

The proposal for the Forced Labor Ban was endorsed by EU committees in October last year, but it has not yet been enacted into legislation.

Over the past few weeks, certain individuals within the European solar PV sector have advocated for increased legislative focus on reported instances of forced labor within the solar supply chain, particularly concerning the alleged exploitation of the Uyghur Muslim community in Xinjiang province, China.

In the previous month, the European Solar Manufacturing Council (ESMC), comprising companies such as Norwegian solar wafer producer Nexwafe, US thin film cadmium telluride (CdTe) module manufacturer First Solar, and Swiss solar manufacturer Meyer Burger, organized a conference. During the event, speakers urged the EU to prohibit the entry of products into its market unless they could demonstrate that their supply chains were devoid of forced labor.

The gathering advocated for a shift in the burden of proof, suggesting that exporting companies should be required to demonstrate the cleanliness of their supply chains, as opposed to the burden falling on the importing government. This concept forms the basis of the Uyghur Forced Labor Prevention Act (UFLPA) in the US, and the proposed CSDDD appears to be considering a comparable approach.

According to US customs, the Uyghur Forced Labor Prevention Act (UFLPA) resulted in approximately 2GW of solar module shipment delays in 2022.

Statistics indicate that approximately 35% of the global polysilicon is manufactured in Xinjiang province. Speakers at the recent ESMC conference asserted that companies currently lack sufficient methods to thoroughly investigate the conditions in the region, be it regarding labor practices or environmental repercussions.