EU promises action on regulatory burden in clean transition effort

Europe’s risk and insurance managers’ regulatory burden and the inability of the insurance market to come up with adequate solutions needed to support the green transition come out as top risks in our annual Risk Frontiers Europe survey. So many will no doubt be pleased to hear that the EU has this week adopted a communication explaining that it is “taking stock” of the clean transition discussions held in recent months with industry and employee representatives, in the face of rising opposition to perceived red tape and competitive pressures that come with the transition. Business groups such as the pan-European federation BusinessEurope fear that the demands placed on EU business from the transition is placing them in an increasingly untenable competitive position with other global markets. The fact that key sustainable efforts such as the Corporate Sustainability Due Diligence Directive (CSDDD), Corporate Sustainability Reporting Directive (CSRD) and Deforestation regulation have all come under intense efforts to water them down and make them less onerous on business is clear evidence of this. The EU leadership is clearly fully aware of the concerns of business and the perceived risk of over-regulation hitting the EU’s competitive position. But at the same time, it remains committed to the clean transition to help tackle climate change and putting Europe at the forefront of the effort to tackle environmental and human rights abuses throughout global supply chains. To try to ensure that business and employee representatives feel they are being listened to and heard, EU President Ursula von der Leyen launched the Clean Transition Dialogues in her 2023 State of the Union speech. She said this was “a new way” for the Commission to engage with industry and social partners, to understand their current challenges, and strengthen and support the implementation of the European Green Deal. Maroš Šefčovič, executive vice-president, European Green Deal, Interinstitutional Relations and Foresight, announced this week the results of the “profound discussion” that has taken place through nine “college” discussions between October 2023 and April 2024 with business groups and what the EU describes as “social partners”. “My main takeaway is that Europe’s decarbonisation must be increasingly driven by market forces, in addition to targets and regulation. We need to keep strengthening the business case for the clean tech sector and for the decarbonisation of our energy intensive industry,” he said. “This is particularly important as we are in the implementation phase of the Green Deal, which – from the industrial perspective – means the phase of scaling-up manufacturing capacities. With this in mind, president von der Leyen launched last year a series of clean transition dialogues to support key sectors in building their business models for decarbonisation,” explained Šefčovič. The commissioner said that the communication identified five building blocks for a “reinforced” industrial approach to delivering the Green Deal. First, and good news for risk and insurance managers burdened with ever-rising reporting burdens, Šefčovič said that clearly an effective and simplified regulatory framework is needed. “Stakeholders are broadly happy with the rules we have put in place, and they now know the direction that has been set. But they also seek our support to help them comply and deliver. The Commission will further focus on burden reduction and its ongoing actions, such as reducing burden from reporting requirements by 25% without undermining its political objectives,” he explained. Second, stable energy prices. “We need to keep addressing uncompetitive energy costs, hampering investments in the clean tech sector and our energy intensive industries,” said Šefčovič. The commissioner said that the EU has a good regulatory framework, such as the Electricity Market Design, the revised Renewable Energy Directive and the Net-Zero Industry Directive, accompanied by the Wind Action Plan, Girds Action Plan and other tools. However, he conceded that it may need to debate additional targeted and temporary measures. “This is a call we have heard from the industry, and which we are attentive to,” he said. Third, modern infrastructure. “The underdeveloped energy infrastructure, especially at the distribution level, can create bottlenecks in the green transition and electrification of our economy. We need to accelerate the roll-out of energy and transport infrastructure,” said Šefčovič. Fourth, easier access to finance. “The private sector will have a key role to play in deploying investment in the clean transition. But we must also provide greater public support to those clean tech sectors where market failures exist,” he stressed. Šefčovič conceded that some sectors are not yet commercially viable, and the EU needs to stimulate investment and help build future markets. Fifth, a stronger single market. “We must strengthen our actions towards creating a single market for clean tech in Europe and start rewarding companies investing in innovative and sustainable technologies, as well as manufacturing with the lowest sustainability footprint,” said Šefčovič. “In practice, it includes boosting demand and off-take for these products to scale up manufacturing of clean products in Europe, improve the business case and consequently reduce the need for public support,” he added. And lastly, a topic close to the hearts of business groups such as BusinessEurope, the EU needs to work harder to achieve a level playing field on a global basis. “We should address the increasingly distorted global trade. We need to more efficiently and flexibly use our trade defence measures to address dumping of subsidised and unsustainably produced goods on the EU and global market,” said the commissioner. “And we also need to urgently address the global carbon pricing, which remains essential not only for achieving our climate ambitions but also for preventing carbon leakage,” he added. ___________________________________________________ The inaugural ESG Insight and Intelligence Conference will take place in London on 26 June. This event will examine the European regulatory demands associated with ESG, look at the impact on the corporate risk profile and consider how these risks can be managed more effectively. It will also drill down on the increasing demands and disclosures requirements placed upon insurance buyers by insurance carriers. For more information, please visit https://events.commercialriskonline.com/ESG-24

EU promises action on regulatory burden in clean transition effort

Risk managers will welcome renewed effort to keep Europe competitive

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