BRUSSELS — Two months into her second term, European Commission President Ursula von der Leyen is gearing up to set fire to reams of environmental red tape that she played a central role in crafting.
Slashing regulation is one of the mantras of the new Commission as Europe’s beleaguered industries — rapidly falling behind their American and Chinese rivals — appeal to Brussels to lighten the EU’s notoriously heavy regulatory load.
On Wednesday the European Commission will present a broad framework of objectives, collectively named the competitive compass, intended as a strategic shift to catalyze business. One of its first concrete measures will be an “unprecedented simplification effort,” to be presented next month.
The keystone will be legislation that streamlines the rulebook on how companies report their compliance with the EU’s green regulations. The big idea is to reduce paperwork so the companies can focus on growth, innovation and competitiveness.
This simplification means, however, that von der Leyen will essentially be taking a scythe to laws she introduced in her first term — some of them barely a year old.
Von der Leyen insists the package will not change the environmental objectives of the rules, but only make them more efficient.
Unconvinced, opponents warn it is a dangerous backtrack on the EU’s green agenda that plays too readily into the hands of conservative forces, including those within the center-right European People’s Party, von der Leyen’s own political family.
“This could be an extremely problematic precedent” and a possible “first step in the deregulation wave across Europe” said Tsvetelina Kuzmanova, EU sustainable finance lead at the Cambridge Institute for Sustainability Leadership — voicing concerns shared by many green groups.
Simplification, not deregulation
Originally announced last November, the “omnibus” legislation will reopen and simplify a number of existing laws at once. The proposal, expected to land Feb. 26, will deliver on a promise von der Leyen made ahead of her reelection to reduce reporting obligations by at least 25 percent in the first half of 2025.
Two of the laws targeted in the legislation — the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) — require companies to report on the environmental impacts and exposure to climate risks of their own activities as well as those of their supply chains.
Once fully implemented, the rules will force businesses large and small to collect and publish data on their greenhouse gas emissions, how much water they use, the impact of rising temperatures on working conditions, chemical leakages, and whether their suppliers — which are often spread across the globe — respect human rights and labor laws.
The simplification package will also review the EU Taxonomy, a classification system which outlines which economic activities are considered green by EU standards, also introduced in the last mandate.
It is not yet clear exactly how the omnibus legislation will change these rules. A Commission spokesperson told POLITICO that “other files are being considered” beyond the reporting, due diligence and taxonomy rules.
‘Completely unreasonable’
These laws, part of the European Green Deal, were designed to push investment toward the greenest companies and put Europe at the forefront of a worldwide green revolution.
But they have become the target of widespread criticism for increasing compliance costs for European companies compared to other jurisdictions, where environmental regulation is weaker and governments have shown little sign of following Europe’s lead.
“The number of data points [in] this directive is completely unreasonable,” especially for mid-size companies, which don’t have the same financial resources as large businesses to cover compliance costs, Florence Naillat, deputy general delegate at METI, a business lobby representing the interests of about 6,200 mid-size companies in France, told POLITICO back in November.
METI had estimated that the cost of compliance with the CSRD could be as high as €800,000 in the first two years of implementation for an average mid-sized French firm.
This is exactly the kind of problem the Commission aims to address by simplifying the rules.
“The importance of simplifying EU rules is widely recognized across political lines,” said a Commission spokesperson, adding that simplification was “crucial to achieving the European Green Deal’s ambitious goals.”
Not far enough
But many powerful groups want the Commission to go much further than the proposed omnibus package.
In a position paper published last week, the EU’s biggest corporate lobby, BusinessEurope, listed 68 “proposals for the reduction of regulatory burden” in which a vast number of new environmental laws are named as potential targets, from EU rules on reducing packaging waste to its produce safety laws, echoing calls from center-right lawmakers for a broad overhaul of EU regulation.
EU member country heads of government across the political spectrum have also warned that regulation is crippling the bloc’s economy, and many have put pressure on the Commission to go further.
France’s centrist government, for one, wants the EU to indefinitely delay its due diligence law, while also echoing Germany’s socialist Chancellor Olaf Scholz’s request to delay the implementation phase of the corporate sustainability reporting obligations by two years.
For CISL’s Kuzmanova, the focus on delays “is very telling” and indicates that “this is not about competitiveness and providing support to European businesses … delaying is not simplifying. It is not making anyone’s life easier.”
Deregulation fears
It’s perhaps no surprise, then, that the European Commission referred to the omnibus as the first of several simplification packages targeting environmental legislation in the EU, fuelling fears that the simplification agenda will lead to a broader unravelling of environmental rules.
The first clue is that the European People’s Party — von der Leyen’s own political family, which had asked for a simplification package during her campaign — want the laws to apply only to “the largest companies with more than 1,000 employees.” The group is also calling for a two-year delay of the EU’s carbon tariffs on imported products, the Carbon Border Adjustment Mechanism.
Another concern is that the simplification package targets rules that have not even been fully implemented. The CSRD, for example, which passed in 2023, only began to apply to a limited number of Europe’s largest companies last year, with the first reporting deadline arriving this month. Other companies are to be brought under the regime in stages: Large listed companies have until 2025; small and mid-sized companies until 2026: while non-EU companies will report in 2028.
“Changing the EU reporting framework that has only recently been adopted and is yet to be fully implemented would create more legal uncertainty,” lawmakers from the Greens group in the European Parliament told von der Leyen in a letter dated Jan. 13.
Not all companies support the simplification package either, with some arguing that messing with the implementation of the rules would be worse. “Investment and competitiveness are founded on policy certainty and legal predictability,” and the omnibus “risks undermining both of these,” big consumer brands like Unilever, Nestlé and Primark warned in a statement dated Jan. 17.
The NGO community, meanwhile, has warned of a misunderstanding over just how much information companies are expected to disclose.
“The European Commission still lacks proper feedback from all relevant stakeholders and Member states on the application of new legislation,” the letter from the Greens adds.
The post Von der Leyen builds bonfire of EU’s environmental red tape appeared first on Politico.
