Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
The EU will need lawmakers responsible for negotiating the directive to significantly reduce the number of companies needed to comply with laws designed to curb supply chain abuse.
But Swedish conservative MEP Jorgen Warborn said the politically toxic law finalised last year requires businesses to take action on environmental and human rights abuses – that they need to be scrapped despite calls from Paris and Berlin.
“If we go down the (Supply Chain Act) removal line, I think European companies must prepare for the fact that they can have due diligence laws in various member states,” Warborn said.
“I’m not entirely sure it’s going to simplify things for business.”
Companies are already unhappy with the bloc’s deficit level, including the new sustainability reporting rules that came into effect last year. Currently, businesses must comply with supply chain laws when member states incorporate it into their laws.
The European Commission proposed in February to simplify supply chain laws and sustainability reporting rules by reducing required due diligence and making reporting requirements troubling.
The original proposal also proposed reducing the number of businesses that must comply with reporting the rules by limiting them to groups with more than 500 employees to 1,000 employees.
Swedish MEP Jorgen Warborn said the European Commission’s proposed changes were “good” but “not enough.” ©Jorgen Warborn
This comes when the EU faces pressure to improve its economic landscape in the face of President Donald Trump’s trade war and China’s undercut.
EU member states and the European Parliament are currently debating how far simplification efforts should go. They aim to agree to the change by the end of the year.
Warborn said the committee’s proposed changes were “good” but “not enough.” In a report on potential amendments, he proposes removing the requirement for businesses to submit mandatory climate transition plans and raising the threshold for businesses with over 3,000 employees and 450 million euros of net sales.
According to EuroStat, about 33MN companies are based in the EU, of which 0.2% employ more than 250 people.
Approximately 6,000 companies have more than 1,000 employees, the committee said.
Resuming the EU’s first proposed green sentimental directives in 2021 and 2022 has created a deep division on how much they will change, or whether to completely abolish the supply chain law.
French President Emmanuel Macron and German Prime Minister Friedrich Merz said both should be scrapped – Warborn said he had influenced several MEPs.
Other right-wing lawmakers are asking businesses with more than 5,000 employees to raise additional thresholds. Socialists and Green MEPs are fighting to keep the order as is.
Approximately 1,000 potential amendments to the regulations have been submitted. These will be discussed by six parliamentary committees.
Warborn’s role is to seek a compromise agreement between competing political interests that ensure recognition across the entire October Congress.
Swedish lawmakers suggest that subsidiaries should be exempt from the Sustainability Reporting Rules entirely.
Companies including Nestlé, Unilever and Primark have warned against reporting sustainability and revisiting due diligence rules, as uncertainty is the cause.
Warborn admitted the argument, but said, “There was a lot of criticism about the louder voice, too bureaucratic, too much deficit in Europe.”
