Europe’s simplification mess frustrates businesses

BRUSSELS — When cocoa farmer Leticia Yankey came to Brussels last October, she had a simple message for the EU: Think about the mess your simplification agenda is creating for companies and communities.

It was just weeks after the European Commission said it might delay the EU’s anti-deforestation law, which requires companies to prove the goods they import into the region are not produced on deforested land, for the second time.

But in Yankey’s Ghana, cocoa farmers were ready for the rules, known as the EU Deforestation Regulation or EUDR, to kick in. “How are we going to be taken serious the next time we move to our communities, our farmers, and even the [Licensed Buying Companies] to tell them that EUDR is … coming back?” Yankey asked. 

Since then, the Commission has kept making changes to the plan. First by floating the delay, then backtracking but proposing tweaks to the law — only for EU governments and lawmakers to reinstate the postponement, pile on additional carve-outs and then leave open the door for further changes in the spring. All within three months.

It’s not just smaller companies and remote communities that are rankled by the EU’s will-they-won’t-they approach to lawmaking.

Bart Vandewaetere, a VP for government relations and ESG engagement at Nestlé, says that when he reports on European legislative developments to the company board, they “[look] a little bit at me like: ‘Okay, what’s next? Will you come next week with something else, or do we need to implement it this way, or we wait?’”

Since the start of Ursula von der Leyen’s second term as European Commission President, the EU has been rolling back dozens of rules in a bid to make it easier for businesses to make money and create jobs.  

Encouraged by EU leaders to hack back regulations quickly and without fuss, the Commission presented 10 simplification packages last year — on top of its plan to loosen the anti-deforestation law — to water down rules in the agricultural, environment, tech, defense and automotive sectors as well as on access to EU funding.

Complication agenda

Brussels says it is answering the wishes of business for less paperwork and fewer legislative constraints, which companies claim prevent them from competing with their U.S. and Chinese rivals. It also promises billions in savings as a result.

“We will accelerate the work, as a matter of utmost priority, on all proposals with a simplification and competitiveness dimension,” the EU institutions wrote this month in a joint declaration of priorities for the year ahead.

But for many businesses, the frequent introduction, pausing and rewriting of EU rules is, just making life more complicated.

“What we constantly hear from clients is that regulatory uncertainty makes it difficult to plan ahead,” said Thomas Delille, a partner at global law firm Squire Patton Boggs, even though they generally support the simplification agenda.

The ones who got ready to implement the laws already even go as far as to say the EU is losing one of its key appeals: being a regulatory powerhouse with policies that encourage companies to transition towards more sustainable business models.

“The European Union unfortunately has lost some trust in the boardrooms by making simplifications that are maybe undermining predictability,” said Nestlé’s Vandewaetere.

The risk is that the EU will shoot itself in the foot by making it harder for companies to invest in the region, which is essential for competitiveness. 

“This approach rewards the laggards,” said Tsvetelina Kuzmanova, senior project manager as the Cambridge Institute for Sustainability Leadership, adding that it “lowers expectations at the very moment when companies need clarity and policy stability to invest.”

Inevitable turbulence

Many of Europe’s decision-makers are convinced that undoing business rules is a necessary step in boosting economic growth. 

The simplification measures “were needed and they are needed,” said Danish Environment Minister Magnus Heunicke, confirming that he believes the EU regulatory environment is clearer now for businesses than it was a year ago. Denmark, which held the rotating presidency of the Council of the EU for the last six months, had led much of the negotiations on the simplification packages, or “omnibuses” in Brussels parlance.

Brussels is also receiving as many calls from businesses to speed up its deregulation drive as those urging caution.

For example, European agriculture and food chain lobbies like Copa-Cogeca and FoodDrink Europe said in a joint appeal that the EU should “address the regulatory, administrative, legal, practical and reporting burdens that agri-food operators are facing.” These, they added, are major obstacles to investing in sustainability and productivity. Successive omnibus packages should, meanwhile, be “proposed whenever necessary.”

But undoing laws requires as much work and time as drafting them. Over the past year, lawmakers and EU governments have been enthralled in deeply political negotiations over these packages. Entire teams of diplomats, elected officials, assistants, translators and legal experts have been mobilized to argue over technical detail that many were engaged in drafting just a couple of years earlier.  

Of the 10 omnibus proposals, three have already been finalized. The EU has also paused the implementation of the rules it’s currently reviewing so that companies don’t have to comply while the process is ongoing.

“If you look at this from an industry perspective, there will be some turbulence before there is simplification, it’s inevitable,” said Gerard McElwee, another partner at Squire Patton Boggs. 

Ironically, the EU has also faced criticism for making cuts too quickly — particularly to rules on environmental protection — and without properly studying the effect they would have on Europe’s economy and communities.

Yankey, the cocoa farmer, said she understands the Commission’s quandary. “They just want to listen to both sides,” she said. “Somebody is ready, somebody is not ready.” But her community will need more EU support to help understand and adapt to legislative tweaks that impact them.

The constant changes do not “help us to build confidence in the rules or the game that we are playing,” she said.