Simplifying the rules, yes, but how? The European Commission at the end of January .” A first discussion on this roadmap is taking place this Wednesday 12 February at the plenary session of the European Parliament in Strasbourg. Among the key issues: the “omnibus” project aimed at simplifying the publication of information on sustainability, as well as due diligence and taxonomy.
In Luxembourg, the financial centre is following the issue very closely. “An omnibus has the significant advantage of aligning different regulations. On the one hand, everything is dealt with simultaneously, which ensures greater consistency. On the other hand, it offers an opportunity for simplification in sustainable finance. But in practice, it won't be easy,” says Antoine Kremer, the Brussels representative of the Luxembourg Bankers’ Association (ABBL), the insurance trade group Aca and the Association of the Luxembourg Fund Industry (Alfi). The European Commission is working hard to present a proposal at the end of February.
The European political parties are already beginning to make their expectations known. The largest of them, the EPP, considers the legislation on corporate sustainability, such as the Corporate Sustainability Reporting Directive (CSRD) and that on corporate sustainability due diligence (CSDD), to be “excessive and burdensome, with immense trickle down effects for European SMEs.” The party of commission president Ursula von der Leyen is calling for substantial changes.
Removing SMEs from the scope
“The implementation of the CSRD and the CSDDD, as well as related legislation including the taxonomy regulation and the Carbon Border Adjustment Mechanism (CBAM) should be put on hold for at least two years,” the EPP demanded in a statement published in January. “In that time, an omnibus regulation should limit the scope of these laws to the largest companies with more than 1000 employees, eliminate the indirect effect to SMEs, align legislative overlaps that currently lead to double reporting and significantly reduce the reporting obligations for large companies by at least 50%.”
Notably, the EPP is also calling for “a revision of the legislation yet to be implemented, including delegated and implementing acts.” This would involve amending “technical” implementing measures.
If we want to remain competitive, decarbonisation must remain at the heart of our strategy.
The left, of course, does not see it that way. For Dutch MEP Lara Wolters (Social Democrat Group), simplification is a legitimate concern, but the --the translation of which is the competitiveness compass--does not support deregulation. Nor does it see it as a means of improving competitiveness.
For the Greens, MEP believes that it is “very premature” to review the rules just as the first wave of extra-financial reporting is arriving. “It makes no sense to change the scope of the laws even before we have this data. Yes, we need to support companies, especially SMEs, with digital tools and financial support. But weakening the requirements of the Green Deal, calling into question due diligence or the principle of not causing significant harm, is a step backwards where we should be moving forward.”
Many companies have already anticipated these rules, argues the Luxembourg politician. “Changing the rules of the game now would penalise those that have gone ahead. Our industries need stability and clarity, not two steps forward followed by one back, as in the Echternach dance procession. Meanwhile, the United States and China are moving forward without hesitation. If we want to remain competitive, decarbonisation must remain at the heart of our strategy. The Draghi and Letta reports say it all.”
It is not a question of calling into question all the measures already adopted.
Asked about the EPP’s position, which gives the impression of approaching this debate with a chainsaw, MEP Martine Kemp (EPP/CSV) speaks of a “redirection” rather than a dismantling. “It is not a question of calling into question all the measures already adopted, but of making the necessary adjustments. Perhaps we went too far, at a time when we were too optimistic, perhaps naïve in believing that we could change the world and influence the global economy with these measures.”
Is the environment the big loser? “We need to take a more global view,” replies the MEP. And she warns against the risk of de-industrialisation in Europe: “This would lead to an increase in imports from countries where environmental standards are much less stringent. By winning back companies in Europe, we would have greater control over how they produce, with environmental criteria that remain stricter than outside the EU.”
On the subject of the border carbon adjustment mechanism (CBAM), Kemp distances herself from the EPP. “Even if the impact of CBAM on certain sectors could require particular attention, personally, I would not have relaunched discussions on the start of the mechanism’s operational phase. The mechanism is essential to protect our single market. I doubt that a postponement would be in our interest. Other countries use taxes to protect their markets. I don’t think Europe should be more cautious than others on this point.”
We need to avoid a legislative instability where everything becomes possible in Parliament.
At the centre of the spectrum, Pascal Canfin (Renew Europe) highlights another issue. The European Commission’s draft omnibus will be presented on the same day as the Clean Industrial Deal. This could blur the political message. “The link between these two texts could create a narrative battle. Some will insist on speeding up the Green Deal, while others will see the omnibus as a step backwards,” said the MEP at a press briefing on Tuesday 11 February.
One example: the CBAM could, via the Clean Industrial Deal, see its extension timetable clarified. However, if the omnibus package includes CBAM, this could reopen the issue. This could lead to broader discussions on the whole system. Canfin believes that “this text should not be amended without prior agreement between the pro-European political forces, to avoid legislative instability where everything becomes possible in Parliament.”
In its view, this omnibus project is a crucial test of the strength of the majority behind von der Leyen. Renew Europe says it is “very aggressive” in its dealings with the commission and its political partners to obtain upstream coordination. “Without this, the proposal could arrive in Parliament without any stability, opening the door to major cuts, or even an alliance between the right and the far right to go well beyond the framework provided by the commission.”
This article was originally published in .