ESG rules under fire as European business calls for less red tape

European companies see energy prices, the regulatory environment, particularly ESG rules, and tax as the biggest barriers to attracting EU investment over other regions, finds a flash survey by business federation BusinessEurope. European businesses are very worried about the huge costs attached to the fast-rising and often overlapping raft of directives and regulations related to ESG. BusinessEurope said that the EU needs to understand the intense pressure European companies find themselves under as they try to compete with rivals in other parts of the world such as North America and Asia. It has urged European rule makers to take a more realistic and pragmatic approach. The Brussels-based group notes that this year alone the EC plans to table 43 new policy initiatives. These come on top of 116 pending proposals that the federation feels will have a “significant” impact on companies. BusinessEurope added that increasing numbers of these proposals have not had a proper impact assessment. The underlying message appears to be that the EU is reacting to pressure from action groups, and activist investors on ESG in particular, with new rules that will place Europe in an increasingly difficult competitive position. “The European business community calls on the EU to urgently change course. The EU needs to focus now on swift action to improve the business environment for European companies. Global competition for investments, employment, growth and technological innovation is decided by framework conditions, not by subsidies only,” said BusinessEurope director general Markus J. Beyrer. “Policymakers should not be fooled by a slightly brightening economic outlook and declining energy prices. Energy prices in Europe will remain higher than for our main competitors, corporate taxes are high by global standards. Current bankruptcy numbers and withdrawal of investment decisions all over Europe show that the risk of de-industrialisation is real,” he continued. “Piling regulations are the number one problem for companies after high energy prices… ignoring the issue of regulatory burden further pushes companies and investments out of the continent and harms Europe as business location,” argued Beyrer. BusinessEurope said that EU policymakers should create regulatory breathing space instead of micromanaging business with increasing small-scale regulations. “In concrete terms, any overlaps and duplicating reporting requirements in the ESG initiatives should be reduced, such as the Due Diligence or Industrial Emissions Directive. A real competitiveness check for new policies and regulations is key to consider cumulative compliance costs and other practical impacts on the business environment,” said the group. “Companies of all sizes currently suffer from the policymakers’ business-as-usual-approach. They, however, are engines for future wealth, employment, innovation and a successful green and digital transition,” added BusinessEurope. “Companies have to deal with the introduction of an unprecedented number of environmental, social and governance (ESG) and tax-related reporting obligations at EU level. These aim to ensure a high level of transparency, but also constitute enormous administrative burden and compliance costs for companies,” it continued. The group pointed out that one of the big four accounting firms recently announced the need for an additional 100,000 accountants up to 2026 just to deal with ESG reporting. This is up by more than a third on current headcount.

ESG rules under fire as European business calls for less red tape

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