Why Relaxing Sustainability Rules Is a Classic EU Trick

Why Relaxing Sustainability Rules Is a Classic EU Trick | INFBusiness.com

Anthony Harwood is a former foreign editor of the Daily Mail.

When it comes to new legislation that has all the hallmarks of “classic EU pomade”, it's hard to beat the trading bloc's sustainability laws, which continue to be watered down.

Consider the sheer audacity with which Emmanuel Macron and Friedrich Merz called last week for the scrapping of due diligence rules that require companies to monitor their global supply chains for human rights abuses and environmental damage.

The leaders of France and Germany are repeating demands, first made by the far right, for the legislation, as well as the rest of the EU's Green Deal, to be scrapped.

Strange bedfellows indeed, but it is an indication of how Europe has tilted to the right and changed the rules of the game by setting less ambitious environmental targets for the Comprehensive Simplification Package.

The most striking example of this retreat from its lofty, earlier commitments is the EU's forestry laws. They have not just been watered down. They have not even moved forward, having been shelved at the last minute in December, and are now facing calls for further delays.

The EU has also been accused of showing favouritism towards member states and punishing Asian countries that claim their role in deforestation has been downgraded based on outdated data.

The EU's Zero Deforestation Regulation (EUDR) was passed to much fanfare two years ago, hailed by environmentalists for its promise to cut global deforestation by 10%. It ensured that products such as cocoa, coffee, palm oil, cattle, soya, rubber and timber would not be able to be sold on the EU market if they came from deforested areas after 2020.

After a delay in December, when Member States as well as suppliers complained that they were not prepared for the bureaucracy (despite having had 18 months to prepare), the European Commission set about making things more palatable.

In March, the Omnibus bill relaxed rules on corporate sustainability reporting and supply chain transparency to make the bloc more competitive with the US and China. It would save European SMEs €6.3 billion in administrative costs they would incur when complying with sustainability information requests and exempt 80% of companies from the Corporate Sustainability Reporting Directive (CSRD).

Last month, in a sop to reluctant member states, the Commission classified all 27 countries as “low risk” for deforestation, despite some, such as Sweden and Finland, having appalling tree-cutting records.

Sweden has the largest “old-growth” forests in Europe, covering 70% of its land area, but they are being cut down faster than the Amazon, and Finland has had to pay €7 billion in EU fines for deforestation.

This led to palm oil producer Malaysia, which reduced its primary forest loss by 65% between 2014 and 2023, and cut it by a further 13% in 2024, accusing the EU of “favoritism” after it was placed in the “standard risk” category.

Benchmarking determines the amount of expensive and bureaucratic due diligence reporting that will be required for goods entering the EU. Malaysian Commodities Minister Johari Ghani said the “standard risk” rating was based on outdated data from 2020, since the country introduced measures to justify the “low risk” rating. He asked the EU to come and see for itself, which they will do.

In addition to the rigging to keep member states in line, the European Commission has been accused of lacking transparency, with key decisions being taken behind closed doors in Brussels.

Only four countries – Belarus (where IKEA was caught sourcing wood for its furniture), Russia, Myanmar and North Korea – were rated as “high risk”; 140 were rated as “low risk” and 50 as “standard risk”, but there was no explanation of how the ratings were determined.

For some member states, even “low risk” is still too high. At least 11 of them, including Finland, want to introduce a “no risk” category to abolish checks entirely, while 19 are pushing for further relaxation of EUDR and even a second deferment.

These efforts, presented as attempts to ease the administrative burden on business, actually undermine one of the EU's most important environmental laws.

It is a classic EU ploy to pay lip service to tackling climate change at a time of widespread forest degradation and illegal logging in Europe, while the trading bloc wants to maintain its reputation as a global environmental leader.

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