Of course, pro-sustainability parties and organisations welcome the increased obligations. It is about time for companies to account transparently for their (un-)sustainable behaviour and ambitions. However, the initial sustainability commitment was different some 10 years ago. The intention was mainly to make transparent the biggest excesses, or the worst unsustainable practices and unjustified green claims.
But this has not quite succeeded. Reporting requirements tilt on all sides towards reporting whether you can live up to being sustainable, while unsustainability gets away easily. Many of these regulations have mainly become a business model of many consultants, who also generally have hardly any idea what exactly they are supposed to do.
This has made sustainable operations or sustainable investments much more expensive than unsustainable ones, without changing much in the economy. Courtesy of regulation.
It is perhaps not very far-fetched to consider that this outcome of almost a decade of European sustainability regulation has become a perfect diversionary tactic of the anti-sustainability lobby. Once they realised that blocking regulation was no longer a viable route, the whole of Brussels plunged into describing everything that smells or claims green as precisely as possible. So detailed, in fact, that afterwards virtually everyone said it was too much and too complicated.
And so that is exactly where we are now. Commission chair Ursula von der Leyen recently suggested that a number of laws (CSRD, CS3D and taxonomy) should be streamlined with an omnibus because surely it is all very complex. If we can reduce that complexity just by reducing overlap (yet also the level of detail) then we are on the right track.
But as many know, there is another much easier path. That is to tailor streamlining the various sustainability rules to where reporting and transparency is most needed: that is, not the difference between light green and dark green activities, but the difference between green and brown. In other words: where business activities are demonstrably exploitative, destructive and simply out of line.
So don't define that 2% of all green activities in a taxonomy with hundreds of categories. No, simply report on the most important things. Simpler and therefore cheaper. But also fairer: now sustainable companies in particular have to incur more costs to prove they are green. And while we're at it, not just report and hope that transparency pays some dividends, but also make companies liable for those damages. Less detail, more effect.
I fear it is going to be difficult to get support on this in Europe now. Under the guise of simplification, we will then get relaxation. A successful trap, you might say. I'd rather keep these rules anyway. Because otherwise it is all too clear what is coming: fewer rules and less transparency about the side effects of European prosperity.
Hans Stegeman is Triodos Bank’s chief economist and this opinion piece was originally published in Dutch newspaper Financieele Dagblad.