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Major corporations and national governments are urging the European Union to reconsider its sustainability initiatives amid ongoing discussions about the repercussions of deregulation in the United States.
ExxonMobil’s Europe president, Philippe Ducom, stated that only a small fraction of the company’s planned €30 billion investment in technologies like hydrogen and carbon capture would be allocated to Europe, citing “frivolous, excessive and expensive regulation” as a barrier.
Ducom voiced concerns to a media outlet, claiming, “A lot of what Europe is doing is trying to do the right thing but doing it the wrong way.”
Meanwhile, the European Roundtable for Industry, which comprises leading industrial and energy firms, expressed strong disapproval of existing regulations aimed at addressing climate issues and enhancing corporate accountability.
They criticized the regulations for their complexity and ambiguity, noting that the definitions and reporting obligations lack clarity.
At the recent Davos meeting, business leaders called on European Commission President Ursula von der Leyen to swiftly reduce the regulatory burden. One CEO pointed out that Europe is becoming less competitive daily, while another emphasized the need to alter the perception of European markets among American investors.
Von der Leyen has committed to simplifying sustainability reporting during her second term, yet concerns are rising that these measures may not sufficiently protect the EU’s competitive edge, especially in light of the US deregulatory environment.
Among the growing chorus of national government critiques, France has recently requested a significant regulatory pause affecting various areas, including chemicals and financial guidelines.
Additionally, German Chancellor Olaf Scholz reached out to the European Commission advocating for a two-year delay in stricter corporate sustainability reporting requirements that are set to commence this month for larger corporations.
This shift marks a significant departure from previous EU leadership, which had endorsed stringent climate policies aimed at mitigating environmental issues.
In 2022, French President Emmanuel Macron had praised these reporting regulations as a transformative step for capitalism.
However, with economic challenges and rising pressure from right-wing political factions, as well as the new US administration’s stance, EU policymakers are grappling with this backlash.
Trump has denounced EU regulations as excessively burdensome in recent remarks, criticizing the bloc’s tax and trade practices while promoting his own deregulatory actions.
Von der Leyen recognized that “too many firms are holding back investment in Europe because of unnecessary red tape” and promised that the commission would initiate a broad simplification of sustainable finance rules.
A notable proposal to reduce corporate reporting obligations across three key directives—sustainability reporting, supply chain regulations addressing environmental and human rights abuses, and green investment definitions—is anticipated next month.
The commission aims to reduce reporting requirements by 25% for larger companies and by 35% for smaller enterprises, as outlined in a draft document intended to enhance EU competitiveness.
However, these proposed changes have sparked division within the commission and among member states, particularly from those that are already compliant with the new reporting standards.
Experts are wary that the pressure from the United States might lead Brussels to retract policies too far.
Martin Porter, head of the Cambridge Institute for Sustainability Leadership, warned of the potential risk that a broad simplification approach could undermine existing policies that businesses have invested in, countering the EU’s strategy to leverage sustainability as an economic advantage.
Additional reporting by Ben Hall
Climate Capital
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