A massive document drop from the European Commission on Wednesday will be the clearest signal yet of how far the EU is prepared to change course on environmental protection, climate action and workers’ rights in pursuit of competitiveness.
Ursula von der Leyen promised a new Clean Industrial Deal for Europe in the first 100 days of her second presidency, but tomorrow all eyes will be on an accompanying ‘omnibus’ proposal to free businesses from corporate sustainability rules – and green groups fear a bonfire of red tape.
The omnibus will include proposals to amend two directives on corporate sustainability: one setting out requirements for reporting a firm’s climate and environment impacts, another requiring due diligence to ensure there are no negative impacts up its supply chains.
Drafts of both amendment proposals have inevitably leaked out of Commission headquarters in the run up to publication on 26 February, and environmentalists and unions have been quick to raise the alarm.
For the Corporate Sustainability Reporting Directive, the picture has been mixed, according to Jurei Yada, head of EU Sustainable finance at the climate think tank E3G. Under the draft proposal, 85% of companies currently subject to the regulation would be exempted, chiefly because the threshold would be raised from 250 to 1,000 employees.
By contrast, it was a “good signal”, that the Commission did not appear to be considering withdrawing the requirement for “double materiality” in reporting.
What this means is that, alongside its financial data, firms are required to report annually on how their bottom line is affected by environmental risk such as extreme weather linked to climate change, and also their own contribution to such risks through their carbon footprint and environmental impacts.
Due diligence
The prospects for the Corporate Sustainability and Due Diligence Directive look rather bleaker, in Yada’s assessment, with provisions on civil liability deleted. “That is a big blow to regulation that was really meant to preserve human rights along the value chain,” Yada said.
Moreover, the requirement to undertake due diligence is limited to direct suppliers, potentially masking abuse and environmental harm further up the supply chain.
Unions see the Commission’s competitiveness drive – centred around a sweeping “simplification” of EU regulation – as nothing but a watering down of workers’ rights and ethical and environmental standards.
The European Trade Union Confederation staged a protest outside the European Commission’s Berlaymont headquarters in Brussels today, with some carrying placards stating that workers are denied boarding the omnibus, which von der Leyen has quipped would be only the first in a “fleet” of such legislative packages.
“The draft omnibus goes far beyond what anyone could reasonably call ‘simplification’ – it is outright deregulation,” ETUC deputy general secretary Isabelle Schömann said. “There is no attempt to strike a balance between the needs of users of sustainability information and companies.”
“Nobody should forget that the directives at risk were introduced under President von der Leyen to prevent a repeat of the Rana Plaza disaster in which over 1,100 people lost their lives [during a Bangladesh property collapse in 2013] because companies did not do their due diligence on abuses in their supply chains,” Schömann said.
The omnibus proposal will also tackle the EU carbon border tax – a new levy on certain imports such as steel based on their estimate carbon footprint, likely freeing all but the largest firms from reporting requirements.
Finally, there is the Taxonomy Regulation, which sets out the criteria for investments to be considered sustainable under EU law, which can impact access to public financial support and whether or products like pension funds or bonds can be marketed as ‘green’.
Of particular concern to critics of the Commission’s war on red tape, is that any reopening of the this raft of sustainability legislation will expose it to potential further amendment as the proposal passes through the intergovernmental talks in the EU Council.
In the European Parliament, where the conservative European People’s Party – the largest group – can rely on support from further to the right as it pursues its stated aim of dismantling what it sees as the excesses of the Green Deal.
“And there’s no saying where that’s going to go,” Yada observed.
But the EPP says it remains committed to the EU’s climate targets, including net-zero by 2050, and that the simplification drive is essential to protect small businesses. The group’s environment lead Peter Liese said last week that removing 91% of European firms from the scope of the carbon border tax would only reduce its impact on emissions by one percent: a price, he argued, that is “acceptable”.
The head of the Brussels based association Business Europe has argued that the Commission must urgently make it easier and more attractive for companies to invest and operate in the EU. “Improving conditions for creating quality jobs starts with facilitating investment, innovation and productivity growth,” Beyrer said last week after meeting senior commissioners.
Catching up on clean tech
The potential controversy over the omnibus proposal looks set to draw attention from the Clean Industrial Deal, a non-legislative paper that will outline the Commission’s vision for getting ahead in the global race for a share of the growing clean tech market: from wind turbines to electric cars, carbon capture to ‘green’ hydrogen.
China is currently in the lead, in terms of both production and control of key global supplies like rare earth metals, but the US is snapping at Beijing’s heels, albeit the picture is somewhat muddied by president Trump’s tariff war and determination to leverage America’s enormous reserves of oil and gas.
“The Clean Industrial Deal needs to go way beyond the simplification agenda; it needs to be a paradigm shift in how we design industrial policy,” said Neil Makaroff, director of Strategic Perspectives, a think tank.
“The first is the link to decarbonization, because unlike the US, the Clean Industrial Deal is not a return to the old gas, oil and coal economy,” Makaroff said, arguing that low-carbon technology is a key to competitiveness for a continent that lacks reserves of its own.
The shift to clean energy will also be central to the last piece of tomorrow’s blizzard of EU paperwork, with European Commission vice-president Teresa Ribera due to present an Action Plan on Affordable Energy.
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