European Commission President Ursula Von der Leyen’s first term in office between 2019 and 2024 was a bona fide regulation spree. With her landmark European Green Deal, she legislated across dozens of sectors to set the European Union on track to emit “net zero” by 2050 and help avoid a worst-case scenario climate catastrophe.
But times have changed, and political priorities with them. The head of the EU’s executive branch is on a deregulation drive to put European businesses on an even footing with their US and Chinese counterparts, while holding on to overall ambitious climate goals.
On Wednesday, EU officials unveiled plans to slash the bureaucratic burden on companies by rewriting several recent laws, in a move that went down poorly with environmental and rights campaigners, and even some industry voices.
The same day, the European Commission also laid out its goal of stimulating a €100 billion ($105 billion) investment drive in clean industrial technologies, also aimed at boosting EU competitiveness.
What is the European Commission actually proposing?
Concretely, the European Commission wants to tone down the rules that businesses must follow on sustainability impact reporting and supply chain responsibility, written into several pieces of already agreed legislation. It is particularly small- and medium-sized enterprises that the EU’s executive branch says it wants to relieve.
The changes, for example, will absolve around 80% of companies currently covered by the corporate sustainability reporting directive: all those with fewer than 1,000 employees. They will no longer face the strict annual reporting requirements that the law stipulates.
The plans will also delay the implementation of a due diligence law until 2028, weakening firms’ obligations to check indirect suppliers for environmental and human rights compliance.
The EU’s executive branch, which is aiming to slash the administrative burden on businesses by 25% by 2029 and even by 35% for smaller businesses, says its plans could lead to savings of €6 billion a year in administrative costs.
In the same vein, the European Commission touted a plan to drum up €100 billion in public and private investment to decarbonize heavy industry and manufacturing, such as steel, and to support renewable energy production. One underlying aim here is to drive down energy costs for European businesses and homes.
Why is von der Leyen doing this now?
Wednesday’s announcements have their origins in von der Leyen’s major focus for her 2024-2029 stint in office: competitiveness. For years, EU officials have been receiving stark warnings that the bloc is losing its economic edge.
“For over two decades, Europe has not kept pace with other major economies,” the Commission wrote last month in a document setting out its vision to tackle the matter over the next five years.
“The EU has fallen behind the US in advanced technologies, while China has caught up in many sectors, and is winning the race for leadership in certain new growth areas. The root cause is a lack of innovation.”
This echoed the words of former European Central Bank President Mario Draghi, who cautioned in September 2024 that lack of productivity growth was an “existential challenge” for the EU.
In the US, President Donald Trump has recently announced his own deregulation spree, pledging last month to “halt the job-killing and inflation-driving regulatory blitz of the [previous] Administration.”
At the same time, the EU fears escalating trade war with the US in tit-for-tat tariffs.
What do environmental and rights campaigners say?
Campaign groups are not impressed with the Commission president’s new push for regulatory simplification. “Von der Leyen is taking a chainsaw to environmental and human rights protections,” Oxfam Germany lawyer Franziska Humbert wrote in a statement on Wednesday.
Of particular umbrage to non-governmental organizations is a provision to dial down corporate civil liability outside the EU, as well as the reduction of due diligence checks to direct suppliers only.
“Companies will have no obligation to identify risks and potential harms beyond their immediate contracts – even if human rights and environmental abuses are widely reported and concentrated towards the bottom of supply chains,” the European Coalition for Corporate Justice wrote.
What do business voices have to say about it?
A major pro-industry lobby, BusinessEurope, welcomed the planned rule changes. “Doing better with fewer and clearer norms is what European companies of all size are asking for,” director Markus Breyer said in a statement.
“By reducing unnecessary reporting and regulatory burdens, [the changes] will allow companies to contribute more effectively to the EU’s sustainability objectives while also preserving the EU economy’s competitiveness.”
But it wasn’t just environmentalists pushing back. Some business voices warned von der Leyen against sowing confusion by reneging on already agreed rules.
In a recent joint letter signed by dozens of businesses including Ikea, the H&M Group and Decathlon, said that “deregulation, whether through lowering environmental or social standards, reneging on international commitments, or reducing the EU’s climate ambition, threatens the stable and predictable legal framework that we depend on.”
What comes next?
The European Commission’s proposals still need to be signed off by the European Parliament and by the EU member states. Members of the European Parliament will likely come under intense pressure in the coming months from lobbyists and campaigners trying to shape the final outcome of the proposal.
Edited by: Anne Thomas
