Dozens of legal scholars and economists have issued a clear warning about the European Commission’s (EC) attempt to undermine corporate accountability laws, saying the action will undermine corporate accountability commitments, cut human rights and environmental protections, and bring higher costs to companies and society.
Under pressure from corporate lobbyists, the EC has been discussing reshaping rules that control how companies monitor and report their activities. Last month, French President Emmanuel Macron and German Chancellor Friedrich Merz both upgraded their campaign against the EU Corporate Sustainability Due Diligence Directive (CSDDD), which covers the company’s supply chain and claims the regulation threatens to keep European businesses from competing. Macron told business executives in his speech that CSDDD should “stand out” completely, expressing support for EC’s “Omnibus simplified software package” that would eliminate the company’s requirement to monitor its non-compliant supply chain, remove mandatory climate transition plans, and significantly weaken enforcement mechanisms, including civil liability provisions.
But legal and economics scholars, environmental organizations and enterprises, and other countries Sweden and Denmarkhas united to defend the laws and regulations.
“Members of the European Parliament should not think that if they delete this article, it would somehow reduce the regulatory burden,” said Thom Wetzer, associate professor of law and finance at Oxford. “Instead, there is a very litigational landscape and differentiation of state demands.
In May, Wetzer and more than 30 other legal scholars Letter to EC Warning that removing regulations is far from reducing costs, it will bring companies a range of new financial and legal risks and make it harder for them to achieve their sustainability and climate goals. “Without guiding regulations, corporate climate transitions will be more disorderly and expensive,” the scholar warns.
Additionally, Wetzer noted that many European companies have taken steps to comply with regulations. Indeed, at the beginning of this year, 11 major brands including IKEA (F500E#85, AS Ingka), Mask (F500E#70) and Unilever (F500E #49) was to support CSDDD, the signature and open letter stated: “Investment and competitiveness are based on policy certainty and legal predictability. Announcement of the European Commission will propose a “comprehensive” Omnibus initiative, which may include the risk of reconsideration of these existing legislation. ”
Wetzer told wealth. “Assuming that this will last for a long time, there are a lot of investments in the regulatory structure. If you change this regulation and go beyond simplification, you take the risk of all these investments.”
Legal scholars are not the only experts to alert EC programs. Also in May, more than 90 prominent economists criticized the comprehensive proposal, strongly refuting the claim that sustainability regulations undermine European competitiveness. Instead, they point to other factors in European economic challenges, including Russian invasion of Ukraine, falling global demand, stagnant wages and long-term underinvestment of public infrastructure.
The statement from economists stressed that the implementation cost of sustainability regulations is minimal, citing a London School of Economics study that estimates that the compliance costs of large companies are only 0.009% of revenue. They believe that the benefit of the regulation far exceeds such a modest fee and further point out that an estimated €70 billion investment gap in the sustainability plan is estimated to be a slight 70 billion euro investment in the sustainability report requirements, and a weakening of sustainability reporting requirements could undermine key programs such as cleaning industrial transactions and discouraging private investment in sustainable projects.
“Economic choice is political choice,” said Johannes Jäger, professor at the University of Applied Sciences BFI, Vienna. “Through a comprehensive proposal, the European Commission chose to reward myopia for lobbying at the expense of people, planets and long-term economic resilience.”
At this point, many critics of the integrated program have seen it as opportunism, saying it is an attempt to imitate and appease US President Donald Trump, who is launching a comprehensive control plan throughout the United States while threatening Europe with tariffs. US companies have been at the forefront of lobbying efforts to undermine CSDDD, Watchdog claims investment giant Blackrock helps Exemption Directive from large financial companies.
“Through a comprehensive proposal, the European Commission chose to reward myopia for lobbying at the expense of people, planets and long-term economic resilience.”Johannes Jäger, professor at the University of Applied Sciences BFI Vienna
This action inspired other European financial leaders to rally around the CSDD. In February, more than 200 financial institutions representing $7.6 trillion in managed assets. Urge EC to maintain strong sustainability standards. Aleksandra Palinska, executive director of the European Sustainable Investment Forum, warned that Omnibus will “limit investors to access comparable and reliable sustainability data and undermine its ability to expand industrial decarbonization investment”.
Instead of following Trump and double-down on regulations, European fiscal experts urged the EU to maintain its determination and enjoy a reputation for its probability. “The best response to policies implemented by the United States is to strengthen the EU’s green agenda, not to weaken Trump’s way. We should follow the Trump approach and we should design our own path,” said François Gegenne, professor of HEC Paris and chief author of the sixth assessment of climate change in January.
Wetzer agreed, saying the comprehensive proposal hurts the EU’s status as a rational actor. “The European Union proves itself not a reliable regulator because they will lean in the face of changes in political winds,” he said, suggesting that strong stable influences are needed during times of turbulence. “We should draw our own courses based on assessments of fundamentals.”
However, besides legal and economic implications, the changes proposed by the European Community have the greatest implications of environmental and human rights. In March, more than 360 global NGOs and civil society groups issued a joint statement on the integrated database, saying that E. President Ursula von der Leyen “deprived human rights, workers’ rights and environmental protection to achieve dangerous controls,” he said.
“The EU proves itself not a reliable regulator because they are facing changing political trends…”Thom Wetzer, associate professor of law and finance at Oxford University, founding director of Oxford Sustainable Law Program
Marion Lupine, a policy official at the European Corporate Justice League, said in the accompanying comment: “The information in Brussels is unclear: industry interests are first, and industry interests are first, and the earth is left behind… Hundreds of civil society organizations around the world stand up without green responsibility, without green responsibility.
With the comprehensive proposal in the European Parliament, the key question is whether EU institutions will retain their initial ambitions to guide Europe through its sustainability transition or to acquiesce corporate lobbying capabilities. The results could have far-reaching implications for corporate accountability, human rights and the fight against climate change.
