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The EU must drastically cut the number of companies required to comply with its law designed to curb abuses in supply chains, the lawmaker in charge of negotiating the directive has said.
Swedish conservative MEP Jörgen Warborn said, however, that the politically toxic law — which was finalised last year and will require companies to take action on environmental and human rights abuses — must remain in force despite calls from Paris and Berlin for it to be scrapped.
“If you go down the line of deleting [the supply chain law] then I think European businesses have to be prepared for the fact that you could have due diligence legislation in different member states,” Warborn said.
“I’m not totally convinced that would be simplifying things for businesses.”
Businesses are already unhappy about the levels of red tape in the bloc, including new sustainability reporting rules that came into force last year. As it stands, companies will be required to comply with the supply chain law once member states have incorporated it into their own law, which must happen by next year.
The European Commission proposed in February to simplify the supply chain law and sustainability reporting rules by cutting the due diligence required and making reporting requirements less onerous.
It also proposed to cut the number of companies that must comply with reporting rules by limiting them to groups with more than 1,000 employees, up from 500 in the original proposal.
It comes as the EU faces pressure to improve the economic landscape in the face of US President Donald Trump’s trade war and undercutting by China.
EU member states and the European parliament are now debating how far the simplification effort should go. They aim to agree changes by the end of the year.
Warborn said that the commission’s proposed changes were “good” but “not enough”. In a report on potential amendments, he will suggest deleting a requirement for companies to file mandatory climate transition plans and raising the threshold to companies with more than 3,000 employees and €450mn in net turnover.
About 33mn companies are based in the EU, according to Eurostat, with 0.2 per cent of those employing more than 250 people.
About 6,000 companies have more than 1,000 employees, the commission has said.
Reopening the directives, first proposed at the height of green sentiment in the EU in 2021 and 2022, has resulted in deep divisions over how much to change them or whether to scrap the supply chain law altogether.
French President Emmanuel Macron and German Chancellor Friedrich Merz have both said it should be scrapped — a call that Warborn said had influenced some MEPs.
Other rightwing lawmakers are calling for the threshold to be raised further to companies with 5,000 or more employees. Socialist and Green MEPs are fighting to keep the directives intact.
About 1,000 potential amendments to the rules have been submitted. These will be debated by six of the parliament’s committees, an unusually high number.
Warborn’s role is to seek a compromise agreement between the competing political interests that will secure approval at the parliament’s plenary in October.
The Swedish lawmaker has suggested that subsidiaries should be fully exempted from sustainability reporting rules.
Companies including Nestlé, Unilever and Primark have warned against revisiting the sustainability reporting and due diligence rules because of the uncertainty it would cause.
Warborn said he acknowledged this argument but said “the louder voices, the huge criticism has been around Europe being too bureaucratic, too much red tape that costs too much money”.
