EU Balances Trade Growth With Sustainability Commitments

By Kaviraj Singh April 19, 2024

The EU's commitment to corporate sustainability and trade relations also presents an opportunity for India to engage in mutually beneficial partnerships that prioritise economic growth while upholding social and environmental values

EU Balances Trade Growth With Sustainability Commitments

In the journey towards a sustainable future, the choices we make today will shape the world we leave for generations to come.In recent years, the European Union (EU) has increasingly emphasised the importance of integrating sustainability principles into both its domestic policies and international engagements. This commitment is evident in the EU's adoption of the Corporate Sustainability Due Diligence Directive (CSDC) and its concurrent efforts to strengthen trade relations with key partners, such as India. Therefore, at this juncture, we must delve into the intricacies of the EU's initiatives, highlighting the implications and challenges associated with corporate sustainability due diligence and trade negotiations, and exploring the path forward for achieving a harmonious balance between economic interests and environmental and social responsibility. 

Corporate Sustainability Due Diligence Directive (CSDC)

The European Commission's proposal for the Corporate Sustainability Due Diligence Directive (CSDC) represents a significant step towards holding corporations accountable for their impacts on human rights and the environment throughout their global supply chains. The directive aims to foster sustainable and responsible corporate behaviour by imposing mandatory due diligence practices on large EU and non-EU companies operating in the EU.

One of the key features of the CSDC is its criteria for applicability, which are based on company size and turnover. Large companies meeting specific thresholds are required to establish robust mechanisms to identify, prevent, and mitigate adverse impacts on human rights and the environment. This includes conducting due diligence not only on their own operations but also on their subsidiaries and business partners, particularly those operating in high-risk sectors such as textiles, agriculture, and extractive industries.

The CSDC's alignment with the objectives of the European Green Deal underscores the EU's commitment to transitioning towards a more sustainable and climate-resilient economy. By integrating sustainability considerations into corporate practices, the EU aims to drive systemic change and promote the transition to a low-carbon, circular economy.

Trade Negotiations with India

Simultaneously, the EU has been actively engaged in negotiations with India to strengthen trade relations and enhance economic cooperation. These negotiations encompass a range of agreements, including a Free Trade Agreement, an Investment Protection Agreement, and an Agreement on Geographical Indications (GIs). India's status as the EU's third-largest trading partner underscores the significance of these negotiations for both parties.

The EU predominantly imports textiles, chemicals, machinery, and agricultural products from India, while European companies have a substantial presence in the Indian market, generating millions of jobs. In 2021 alone, the EU accounted for €88 billion worth of trade in goods with India, representing 10.8 percent of total Indian trade. Conversely, India is the EU's 10th largest trading partner, accounting for 2.1 percent of EU total trade in goods.

Despite the mutual economic benefits, trade relations between the EU and India have faced challenges, including regulatory barriers, market access issues, and concerns over labour rights and environmental standards.

Challenges and Opportunities

Despite the EU's progressive stance on corporate sustainability, challenges remain in implementing and enforcing the CSDC. The recent watering down of the directive, driven by concerns over its potential impact on small and medium enterprises (SMEs), has raised questions about its effectiveness in addressing systemic issues such as forced labour and environmental harm. Moreover, the lack of stringent enforcement mechanisms and accountability measures may undermine the directive's intended objectives.

Similarly, in the context of trade negotiations with India, reconciling economic interests with social and environmental concerns poses significant challenges. While trade liberalisation can stimulate economic growth and create employment opportunities, it also risks exacerbating inequalities and environmental degradation if not accompanied by adequate safeguards.

The Way Forward

Moving forward, the EU must adopt a comprehensive approach to promoting sustainability while advancing trade relations with India and other partners. This entails strengthening the enforcement mechanisms of the CSDC, enhancing transparency and accountability in supply chains, and promoting responsible business conduct.

Moreover, the EU should leverage its economic influence to incentivise sustainable practices among its trading partners, including India. This may involve incorporating sustainability clauses into trade agreements, providing technical assistance and capacity-building support, and fostering multi-stakeholder dialogue on sustainability issues.


In conclusion, the EU's dual commitment to corporate sustainability and trade relations reflects its ambition to reconcile economic prosperity with social and environmental responsibility. By embracing a balanced approach that integrates sustainability into trade negotiations and regulatory frameworks, the EU can foster a more equitable and sustainable global economy. However, realising this vision will require concerted efforts from governments, businesses, civil society, and international organisations to address the complex challenges ahead. The EU's commitment to corporate sustainability and trade relations also presents an opportunity for India to engage in mutually beneficial partnerships that prioritise economic growth while upholding social and environmental values. By embracing sustainable practices and fostering collaborative efforts, India can contribute to a more equitable and environmentally responsible global economy. Therefore, through dialogue, cooperation, and shared responsibility, the EU and India can together pave the way for a sustainable future that benefits both nations and the world at large.

(Dr. Kaviraj Singh is Founder and Managing Director of Earthood.)