The leaders of France and Germany have called on the European Union to scrap a supply chain audit law.
While requiring companies to make environmental and human rights checks on their direct suppliers, the law also forms part of the “European Green Deal.”
The law is mainly for EU companies with more than 1,000 employees and a net worldwide turnover of more than 450 million euros ($486 million) and non-EU companies with a net turnover of more than 450 million euros in the EU.
French President Emmanuel Macron said on May 19 that the law should be taken off the table. French companies, backed by Macron, have previously criticized the law as “overtly punitive.”
German Chancellor Friedrich Merz called for the law to be scrapped during his first visit 10 days ago as chancellor to Brussels.
“We are fully in agreement with Chancellor Merz and other colleagues on the need to move much faster ... and [the supply chain audit law] and a few other regulations should not simply be postponed for a year but discarded,” Macron told business executives gathered for an investment summit in Versailles on May 19.
The EU Commission has already proposed reforms to the law to reduce red tape for European businesses.
The call from the EU’s biggest economies comes as the EU rolls out its “Simplification Omnibus,” which aims to enable the 27-nation bloc to compete with the likes of the United States and China.
“This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonization goals. And more simplification is on the way,” she said.
The European Commission, the bloc’s executive arm, aims to reduce reporting burdens by 25 percent in an initial wave of measures in the first half of 2025. It said this would translate into savings of 40 billion euros ($42 billion) for European companies.
The omnibus package proposes relaxing the rules on how businesses report the environmental and social impact under the Corporate Sustainability Reporting Directive of their activities, as well as supply chain due diligence rules under the CSDDD.
French business groups noted that the country already has its own national version of the supply chain law, called the 2017 French Duty of Vigilance law.
Under the law, judges can fine large companies up to 10 million euros ($10.8 million) if they fail to publish annual public vigilance plans. Fines can reach 30 million euros ($32.5 million) if the failure results in damages that could have been prevented.
The two major French business associations, Mouvement des Entreprises de France (MEDEF) and Association française des entreprises privées (AFEP), both expressed concerns about the CSDDD.
“No company, regardless of its size, is now really able to control its entire value or business chain. The operational and financial impacts of this text on our companies are difficult to measure and, as a result, have not been seriously assessed by an impact study,” it said.
It said that the “overtly punitive approach adopted by the directive exposes European companies to the risk of crippling sanctions.”
The Epoch Times has contacted the European Commission for comment.
