EU closes deal to slash green rules in major win for von der Leyen’s deregulation drive

BRUSSELS — More than 80 percent of Europe’s companies will be freed from environmental reporting obligations after EU institutions reached a deal on a proposal to cut green rules on Monday.  

The deal is a major legislative victory for European Commission President Ursula von der Leyen in her push cut red tape for business, one of the defining missions of her second term in office.

However, that victory came at a political cost: The file pushed the coalition that got her reelected to the brink of collapse and led her own political family, the center-right European People’s Party (EPP), to team up with the far right to get the deal over the line.

The new law, the first of many so-called omnibus simplification bills, will massively reduce the scope of corporate sustainability disclosure rules introduced in the last political term. The aim of the red tape cuts is to boost the competitiveness of European businesses and drive economic growth.

The deal concludes a year of intense negotiations between EU decision-makers, investors, businesses and civil society, who argued over how much to reduce reporting obligations for companies on the environmental impacts of their business and supply chains — all while the effects of climate change in Europe were getting worse.

“This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate,” said Marie Bjerre, Danish minister for European affairs. Denmark, which holds the presidency of the Council of the EU until the end of the year, led the negotiations on behalf of EU governments.

Proposed by the Commission last February, the omnibus is designed to address businesses’ concerns that the paperwork needed to comply with EU laws is costly and unfair. Many companies have been blaming Europe’s overzealous green lawmaking and the restrictions it places on doing business in the region for low economic growth and job losses, preventing them from competing with U.S. and Chinese rivals.  

But Green and civil society groups — and some businesses too — argued this backtracking would put environmental and human health at risk.

That disagreement reverberated through Brussels, disturbing the balance of power in Parliament as the EPP broke the so-called cordon sanitaire — an unwritten rule that forbids mainstream parties from collaborating with the far right — to pass major cuts to green rules. It set a precedent for future lawmaking in Europe as the bloc grapples with the at-times conflicting priorities of boosting economic growth and advancing on its green transition.

The word “omnibus” has since become a mainstay of the Brussels bubble vernacular with the Commission putting forward at least 10 more simplification bills on topics like data protection, finance, chemical use, agriculture and defense.

Less paperwork  

The deal struck by negotiators from the European Parliament, EU Council and the Commission includes changes to two key pieces of legislation in the EU’s arsenal of green rules: The Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). 

The rules originally required businesses large and small to collect and publish data on their greenhouse gas emissions, how much water they use, the impact of rising temperatures on working conditions, chemical leakages and whether their suppliers — which are often spread across the globe — respect human rights and labor laws.   

Now the reporting rules will only apply to companies with more than 1,000 employees and €450 million in net turnover, while only the largest companies — with 5,000 employees and at least €1.5 billion in net turnover — are covered by supply chain due diligence obligations.

They also don’t have to adopt transition plans, with details on how they intend to adapt their business model to reach targets for reducing greenhouse gas emissions.  

Importantly the decision-makers got rid of an EU-level legal framework that allowed civilians to hold businesses accountable for the impact of their supply chains on human rights or local ecosystems.

MEPs have another say on whether the deal goes through or not, with a final vote on the file slated for Dec. 16. It means that lawmakers have a chance to reject what the co-legislators have agreed to if they consider it to be too far from their original position.