The European Commission has announced a watered-down version of its planned European Union Supply Chain Act after facing criticism from the business community.
“Simplification promised, simplification delivered!” EC President Ursula von der Leyen said regarding the changes.
“This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals. And more simplification is on the way.”
With the move revealed on February 26, the European Commission has apparently turned away from environmentalism in its push to simplify regulations in line with its new plans to boost competitiveness.
The EU Supply Chain Law aimed to hold companies accountable for human rights and environmental violations in their supply chains. In practice, it proved highly challenging, imposing strict requirements on companies. It had given targeted businesses until 2028 to comply.
According to the European Greens, the changes were nothing less than a “dismantling” of the EU’s Green Deal.
During its presentation, the EC said it would remove around 80 per cent of companies from the scope of sustainability reporting.
Instead, the body said it would focus on the largest businesses “which are more likely to have the biggest impacts on people and the environment”.
Those with fewer than 1,000 employees and a €50 million turnover would now not fall under regulations. Initially, the EC had included all companies with more than 250 employees.
With this, the EC said it wanted to “ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains”.
It said it would simplify the most complex Do no Significant harm (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals.
DSNH is a key part of the EU’s sustainable finance framework
Sustainability due diligence requirements would also be simplified in a bid to avoid unnecessary complexities and costs. The frequency of periodic assessments and monitoring of partners was reduced from once a year to once every five years.
Brussels said it would increase the “harmonisation” of due diligence requirements to ensure a level playing field.
EU civil liability conditions would be eliminated, the EC said, while promising it would ensure that victims still had the right to full compensation for damages caused by non-compliance.
At the same time, companies would be protected from over-compensation under the civil liability laws of member states.
Regarding the The EU’s Carbon Border Adjustment Mechanism (CBAM), the EC announced exemptions for small importers and simplified rules.
CBAM is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods.
It further announced the proposal of a series of amendments to simplify and optimise the use of several investment programmes.
Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy said: “We are taking concrete steps to cut red tape and make EU rules more accessible and effective for citizens and businesses.
“Today’s package is the first step of our far-reaching simplification efforts across all sectors of legislation.”
The changes came after pressure from business communities across Europe, which had pushed back against the sustainability guidelines from the original Supply Chain Act, which is part of the Green Deal.
Businesses feared an expensive, bureaucratic overload and the introduction of a lot of red tape from Brussels, putting them in a competitive disadvantage compared to operators in regions including the US and Asia, which have not implemented similar measures.
NGOs and others, though, were critical of the EC for its apparent shift.
“With the omnibus package, Commission President Von der Leyen is taking a chainsaw to environmental and human rights protections. The directive is a milestone,” said Franziska Humbert, lawyer and policy adviser at Oxfam Germany, said.
“Without binding due diligence obligations, companies will not take responsibility – something the disasters of recent years have made painfully clear: Collapsing textile factories, dam failures in mining and pesticide poisoning on banana plantations.”
Humert called it “a retreat from responsibility” that would turn out to be “disastrous”.
Greens MEP Anna Cavazzini said: “The problems the European industry is experiencing are certainly not due to the EU due diligence law, which is not even in force yet.”
“We must make EU laws as unbureaucratic as possible. But the leaked reform of the EU due diligence law simply guts it.
How can consumers then still be sure that their clothing or coffee is free from exploitation?" Our MEP @anna_cavazzini ⤵️https://t.co/YPyCd9dMDQ
— Greens/EFA in the EU Parliament 🌍 (@GreensEFA) February 24, 2025
