EU's red tape cuts leave big businesses wanting more

Reuters

21-03-2025

BRUSSELS, March 21 (Reuters) - Austrian manufacturer RHI Magnesita spends about 1 million euros of its roughly 400 million euros earnings a year ensuring it complies with EU rules on corporate sustainability. A first wave of reforms to peel back layers of red tape will do little to cut that bill, it says.
The European Union's 52-page 'Simplification Omnibus ', which would exempt smaller companies from sustainability reporting and pare back obligations on supply chain transparency, has left bigger companies like RHI Magnesita (RHIM.VI), opens new tab frustrated and pushing for more.
The reforms were billed as a drive to remove layers of bureaucracy that cost European businesses time and money and set them at a disadvantage against cheaper rivals in China and in the U.S. where the Trump administration is aggressively rolling back regulation to spur growth.
"It looks, at least at first glance, that it actually doesn't change very much," RHI Magnesita's chief executive Stefan Borgas told Reuters.
RHI Magnesita says it conducts an additional audit and employs three or four full-time employees to collect the amount of data required by the EU law, which asks companies to report on more than 1,000 sustainability data points.
The firm's global business spans 65 production sites and employs 20,000 staff. It reported adjusted earnings before tax, interest and amortization of 407 million euros in 2024.
February's proposals were part of a broader package of EU reforms aimed at bolstering European competitiveness and encouraging industry to decarbonise.
EU leaders discussed further rounds of reforms at a summit in Brussels on Thursday, where they published a joint statement asking the Commission to target rules around industrial decarbonisation and defence next.
The European Commission's proposals to curb sustainability rules will bring relief to businesses employing fewer than 1,000 staff, which the plans would exempt from the reporting rules. It forecasts companies will save 4.4 billion euros ($4.77 billion) per year.
Larger companies are likely to benefit more from proposed changes to supply chain transparency rules, which the Commission says would more than halve the estimated annual compliance costs of 480,000 euros for the largest companies.
Still, big business remains unconvinced. The AFEP group of the 118 biggest private businesses in France said the proposals "do not correct the bureaucratic burden" for larger companies.
Gwenaelle Avice Huet, Europe head of French blue-chip Schneider Electric (SCHN.PA), opens new tab, with annual revenues of 38 billion euros, said big companies have "been a little bit set aside". However, she did welcome the shelving of plans to introduce more specific reporting for each sector.
"At least this one has been postponed," Huet said. "But this is really minimal. We aren't talking about simplification."
DIVISIONS OVER DEREGULATION
Not everyone is in favour of the deregulation drive. Opponents say it reduces corporate accountability and the ability to root out issues around human rights or the environment in large firms' operations. Some investors say the changes would make it harder to decide where to put money to help the bloc reach its climate goals.
RHI Magnesita boss Borgas said the time and costs involved for the fireproof materials manufacturer to fulfil its obligations are resources that "at the end of the day, we cannot invest in CO2 emission reductions."
There is growing recognition amongst some European Commissioners that even as the bloc maintains it will not walk back its net zero emission target and other climate goals, excessive red tape is a drain on competitiveness.
"We realised that we created an economy around these new texts with new specialists, new companies, consulting firms," European Commission industry chief Stephane Sejourne said, of the sweeping nature of sustainability laws, prior to the proposed changes.
Europe-wide industry group BusinessEurope said its members expected the U.S. 'deregulation agenda' to divert investment away from Europe.
Further 'simplification' packages for autos and farming regulations are already in the works.
"In a way, this proposal opens the door for wish lists for more changes," said one senior EU diplomat.
The proposals must still be approved by European lawmakers, amongst whom there are deep divisions. Earlier proposals seen by Reuters would have loosened the rules further, exempting more companies. They were changed after push back from some Commissioners, EU officials told Reuters.
Some say Brussels is not solely to blame for excessive red tape. Bulgarian EU lawmaker, Radan Kanev, with the European People's Party said much of it was the result of national governments poorly implementing EU rules, creating layers of overlapping EU, national and regional bureaucracy.
A 2024 paper by the Columbia Business School and New York University Shanghai found the economic cost of red tape varies significantly between EU countries - from just 0.1% of GDP in Austria, to 3.9% in France.
"This is a problem which is so deeply connected to what happens in our national bureaucracies that I'm afraid it's not easily solvable," Kanev said.
($1 = 0.9218 euros)