February 3 – With the inauguration of President Donald Trump, and his agenda of narrow economic nationalism, Europe faces hard choices. The new U.S. president inevitably emboldens similar voices in Europe too. Together they stoke fears that Europe’s economies are uncompetitive and ossified, about to be run over by the “animal spirits” unleashed in the U.S. by blanket deregulation, arbitrary tariffs and convenient myopia on our ecological crisis.
This narrative is being weaponised by those who seek to destroy Europe’s advances over the last five years in building public trust in markets through environmental and climate protection, tackling inequalities and defending human rights.
This welcome body of legislation under the Green Deal, opens new tab aims to protect consumers, workers and communities in Europe and outside.
European lawmakers must hold their nerve. The regulations are sound and arose in the EU Sustainable Finance Action Plan, explicitly to foster sustainable economic growth, transparency and long-termism in the economy. Those who seek to do away with the EU’s Green Deal, including supply chain laws, are wildly exaggerating their administrative burden to companies, saying it is crippling innovation.
By contrast, the broad evidence is that smart regulation like this in fact encourages innovation by rewarding forward-looking businesses and raising costs to laggard companies.
Commissioner Ursula von der Leyen made a serious concession to corporate lobbies in November with an “omnibus” package, that would seek to integrate three pieces of newly adopted (and already harmonised) EU legislation – namely taxonomy, opens new tab, the Corporate Sustainability Reporting Directive, opens new tab (CSRD) and Corporate Sustainability Due Diligence Directive, opens new tab (CSDDD) – in the name of avoiding duplication.
Unsurprisingly, and simultaneously, the biggest business associations of Germany, France and Italy declared their support for it. The political turmoil in Germany and France has created a panic among their governments, and reducing red tape to bring back jobs and growth is an important element of their populist reactions.
But this concession threatens to open a Pandora’s box. The responses show that some were waiting for this opportunity not just to streamline but to return to business as usual, where corporate harm to planet and people are left to states and communities to handle.
With the climate crisis upon us, and public grievance at inequality growing, Europe is in a leading position in terms of long-term competitiveness through responsible business conduct. The new regulation, which is now denounced as a “bureaucratic burden” despite its emphasis on smart and focused action, is there to create trust that companies can be a force for not only profitability but also for good. If we now abandon these principles, we abandon them at our peril as public trust erodes.
It is vital to gain the trust of citizens and consumers that the products and services they buy do not originate from child labour or the reckless destruction of the environment. To dismantle laws, or even fall back on discredited voluntary guidelines, would be a betrayal of citizens’ legitimate expectations of governments to direct markets towards shared prosperity and the common good.
Another element of trust is that companies have the right to expect legal certainty and predictability from lawmakers. The EU has long adhered to “better regulation”. Those principles might now be grossly sidelined.
Concerned businesses, investors and organisations are warning the commission against opening the newly adopted legislation. The result is not going to be simplification but complexity and confusion.
The views of responsible companies that have called for mandatory rules instead of failing certifications should be heeded. A coalition of companies, opens new tab, including Unilever, Nestle and Mars state that opening the legislation could undermine investment. They point to the potential of these laws “to drive long term resilience and competitive advances of European businesses”.
More than 150 business and human rights professionals wrote to the commission counselling against opening the primary legislation. They pointed out that the CSDDD should not even be a part of these considerations as it is not a reporting instrument. Instead, they called for “efficient implementation” and “guidance to help companies and their advisors avoid misguided implementation”.
Similarly, 170 civil society organisations have appealed that “the EU should not undo the progress that has already been achieved” in protecting human rights, the environment and climate, “all while providing stakeholders with a level playing field through clear expectations, legal certainty and timely and comprehensive guidelines and implementation”.
To abandon these forward-thinking laws would display enormous weakness by the new commission to the United States, China and Russia. After years of an assertive Brussels Effect (in which many smart European standards have been adopted by business worldwide), it would signal a loss of confidence, leadership and direction.
Thus the omnibus initiative, if pursued, needs to be confirmed as a limited effort to strengthen further the guidance for the excellent social and environmental regulations now enshrined in European legislation.
By Heidi Hautala and Phil Bloomer
Published in Ethical Corporation Magazine, Reuters News
Read the article in Reuters »
