The European Union’s current retreat from corporate social responsibility measures adopted during the 2019-2024 legislative term threatens to backfire spectacularly, undermining both European companies and domestic producers in ways that their most ardent opponents seem utterly unable to grasp.
During the previous European Commission’s mandate, two landmark directives emerged as central pillars of the Green Deal’s ambitious corporate accountability framework. The Corporate Sustainability Reporting Directive (CSRD) established comprehensive reporting requirements for companies’ environmental and social impacts, creating transparency where opacity had long reigned. The Corporate Sustainability Due Diligence Directive (CSDDD) went considerably further, requiring companies operating within Europe to ensure their subsidiaries and suppliers worldwide comply with fundamental standards regarding human rights, labour conditions, and environmental protection.
The corporate counteroffensive
From the very outset, these directives faced ferocious and sustained lobbying from European employers’ organisations, determined to water down their provisions. The French and German governments proved particularly receptive, acting as willing conduits for business concerns within the Council. This coordinated pressure campaign succeeded in significantly weakening the original proposals, reducing their scope and limiting the number of companies affected. Yet even these substantially diluted versions proved too much for the business lobby, which renewed its assault with remarkable vigour the moment Ursula von der Leyen’s second Commission took office last December.
The new Commission proved remarkably receptive to these renewed demands. Its draft Omnibus 1 directive, unveiled on 25 February, essentially gutted both measures as part of a sweeping deregulation agenda that the new European executive has embraced with enthusiasm. The reporting requirements have been dramatically scaled back and now apply only to companies with more than 1,000 employees and €450 million in annual turnover—a massive increase from the original thresholds of merely 250 employees and €50 million in turnover. The due diligence obligations have been restricted even more dramatically: they now cover only firms with more than 5,000 employees and €1.5 billion in turnover within the EU, compared with the initial thresholds of 1,000 employees and €450 million. Perhaps most significantly, and most disappointingly for advocates of corporate accountability, the provision allowing civil liability claims at EU level against companies failing to meet their due diligence obligations has been eliminated entirely. This approach subsequently found ready support in both the Council and the European Parliament’s initial discussions.
However, on 22 October, the Parliament delivered an unexpected and stinging rebuke, rejecting by 318 votes to 309 the negotiating mandate that would have permitted its representatives to begin trilogue discussions with the Council and Commission to finalise this Omnibus 1 Directive. This negative vote resulted from an unlikely and somewhat bizarre coalition: left-wing members who believed the CSRD and CSDDD directives were being dismantled far too thoroughly joined forces with far-right members who, conversely, believed that even more aggressive deregulation was necessary. This vote particularly infuriated German Chancellor Friedrich Merz, who had invested considerable political capital and personal prestige in challenging these directives. The ultimate fate of the Omnibus 1 package should be determined in the coming weeks, though the political dynamics remain highly uncertain.
A spectacular own goal for European competitiveness
The bitter irony in this entire saga is that European employers, in their zealous campaign to dismantle corporate social responsibility measures, are actively undermining Europe’s competitiveness while inadvertently strengthening their foreign competitors. The European Union’s original strategic logic in introducing these measures was both sound and sophisticated: leverage the unavoidable scale of its market—representing a full 20 per cent of global consumption—to raise labour and environmental standards worldwide through market mechanisms. In the conspicuous absence of multilateral institutions powerful enough to enforce compliance with International Labour Organisation conventions, the 1948 Universal Declaration of Human Rights, the Paris Agreement, and basic environmental standards, the EU had wisely decided to use private actors operating within its borders and their extensive supply chains as de facto enforcement mechanisms to limit the social and environmental dumping that damages European producers and to move towards a genuinely level global playing field.
By rejecting these standards with such vehemence, European employers are essentially facilitating the very social and environmental dumping practices that cause relocations, destroy jobs, and undermine the European Standort. They are, in effect, making it easier for competitors in countries with lower standards to undercut European production through practices that would be unthinkable within Europe itself.
The self-harm extends even further into territory that should alarm any strategically minded business leader. By fighting this increasingly desperate rearguard action, European businesses are effectively rolling out the red carpet for foreign multinationals, particularly Chinese and American corporations, to penetrate and dominate the European market itself. It bears emphasising that both the CSRD and CSDDD are not reserved exclusively for European companies—they apply to all companies of significant size operating within the European market, regardless of their origin. However, given the pre-existing and well-established regulatory framework in Europe, European companies are inherently and substantially better positioned to meet such requirements than Chinese, American, or Indian competitors, who emerge from business environments with significantly weaker reporting obligations and far less developed social and environmental regulatory frameworks.
By drastically limiting the scope of these directives and stripping them of their meaningful substance, European employers are simply making it easier for multinationals from countries with lower social and environmental standards to capture market share from European companies within the EU itself. They are, quite literally, handing their competitors a gift-wrapped advantage in their own home market, an act of commercial self-sabotage that defies rational explanation.
This opposition therefore proves doubly counterproductive, simultaneously undermining both the defence of European production locations and the competitive position of European companies themselves. Far from strengthening the EU’s competitiveness, as they so loudly claim, European employers are shooting themselves squarely in the foot—and taking the rest of European society down with them in the process.
Guillaume Duval is adviser to the Jacques Delors Institute, former editor-in-chief of Alternatives Economiques and former speechwriter of HRVP Josep Borell.
