Dozens of legal scholars and economists have issued stark warnings over attempts by the European Commission (EC) to weaken corporate accountability laws, saying the action will wreck corporate accountability commitments, slash human rights and environmental protections, and lead to higher costs for companies and society.<\/p>\n
Under pressure from corporate lobbyists, the EC has been discussing reshaping rules that govern how companies monitor and report their activity. Last month, both French President Emmanuel Macron and German Chancellor Friedrich Merz escalated their campaign against the EU\u2019s Corporate Sustainability Due Diligence Directive (CSDDD), which covers firms\u2019 supply chains, claiming that the regulations threatened to make European businesses uncompetitive. In a speech, Macron told business executives the CSDDD should be \u201cput off the table\u201d entirely, expressing support for an EC \u201cOmnibus Simplification Package\u201d that would eliminate requirements for companies to monitor their supply chains for violations, remove mandatory climate transition plans, and significantly weaken enforcement mechanisms including civil liability provisions.<\/p>\n
But legal and economics scholars, environmental organizations and businesses, along with countries such as Sweden<\/a> and Denmark<\/a>, have united to defend the regulations.<\/p>\n \u201cThe members of the European Parliament shouldn\u2019t be fooled into thinking that if they remove this article that that\u2019s going to somehow amount to a reduction in regulatory burden,\u201d said Thom Wetzer, associate professor of law and finance at the University of Oxford, and the founding director of the Oxford Sustainable Law Programme. \u201cWhat will come in its place is a very litigious landscape and differential implementation of national requirements. You will have replaced a nicely uniform obligation with a patchwork of a variety of different and uncertain obligations.\u201d<\/p>\n In May, Wetzer and more than 30 other legal scholars sent a letter to the EC<\/a> warning that, far from reducing costs, scrapping the regulations would create a range of new financial and legal risks for companies, as well as making it harder for them to achieve their sustainability and climate goals. The scholars warn that, \u201cWithout guiding regulations, corporate climate transitions will be more disorderly and costly.\u201d<\/p>\n Furthermore, Wetzer notes, many European companies have already taken steps to comply with the regulations. Indeed, towards the beginning of the year, 11 major brands, including the likes of IKEA [F500E #85, as Ingka<\/a>], Maersk<\/a> [F500E #70] and Unilever<\/a> [F500E #49] came out in support of the CSDDD, signing and open letter that stated: \u201cInvestment and competitiveness are founded on policy certainty and legal predictability. The announcement that the European Commission will bring forward an \u2018omnibus\u2019 initiative that could include revisiting existing legislation risks undermining both of these.\u201d<\/p>\n \u201cBusinesses have already started to put in place reporting frameworks to be able to align with the regulatory package,\u201d Wetzer told Fortune. \u201cThere has been a lot of investment in the regulatory architecture on the assumption that this would stay in place for a long time. If you change this regulation and you go beyond simplification, you run the risk that all of those investments go down the drain.\u201d<\/p>\n Legal scholars aren\u2019t the only experts to have sounded the alarm on the EC\u2019s plans. Also in May, more than 90 prominent economists criticized Omnibus proposals, strongly refuting claims that the sustainability regulations harm European competitiveness. Instead, they point to other factors behind Europe\u2019s economic challenges, including the energy price crisis following Russia\u2019s invasion of Ukraine, declining global demand, wage stagnation, and chronic underinvestment in public infrastructure.<\/p>\n The economists\u2019 statement emphasizes that implementation costs for sustainability regulations are minimal, citing a London School of Economics study that estimated compliance costs for large companies at just 0.009% of revenue. They argue that the benefits of the regulations far outweigh such modest expenses, and further note that, with an estimated \u20ac750 billion investment gap in sustainable initiatives, the weakening of sustainability reporting requirements could undermine crucial programs like the Clean Industrial Deal and discourage private investment in sustainable projects.<\/p>\n \u201cEconomic choices are political choices,\u201d said Johannes J\u00e4ger, a professor at the University of Applied Sciences BFi Vienna. \u201cWith the Omnibus proposal, the European Commission is choosing to reward short-sighted corporate lobbying at the expense of people, planet, and long-term economic resilience.\u201d<\/p>\n To this point, many critics of the Omnibus package have framed it as opportunistic, saying it is an attempt to both mimic and placate U.S. President Donald Trump who, whilst threatening Europe with tariffs, is carrying out a program of sweeping deregulation across America. U.S. companies have been at the forefront of lobbying efforts to undermine the CSDDD, with watchdogs claiming that investment giant BlackRock helped carve out exemptions<\/a> from the directive for large financial firms.\u00a0<\/p>\n \u201cWith the Omnibus proposal, the European Commission is choosing to reward short-sighted corporate lobbying at the expense of people, planet, and long-term economic resilience.\u201dJohannes J\u00e4ger, professor, University of Applied Sciences BFi Vienna<\/p>\n<\/blockquote>\n\n