Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
France and Germany have called for the EU to scrap a supply chain law that both countries had previously championed as a centrepiece of the bloc’s ambitious climate and human rights agenda.
French President Emmanuel Macron told business leaders gathered in Versailles on Monday that the law, which requires companies to take action against forced labour and mitigate the environmental impact of their operations outside the EU, should be taken “off the table”.
His call comes days after Germany’s new Chancellor, Friedrich Merz, said that postponing the law for one year was “at best a first step” and that its “complete repeal . . . is the next logical step”.
EU member states and the European parliament are currently negotiating the postponement of the supply chain rules.
Macron said that he was “clearly aligned” with Merz on the issue and that one year’s postponement was not enough. His remarks were met with applause throughout the Versailles ballroom.
Pressure on the EU’s sustainability rules has been building over the past year as the bloc tries to see off low-cost competition from China and more recently an aggressive trade policy from the US.
European Commission president Ursula von der Leyen has bowed to pushback from member states and business and agreed to simplify and delay major parts of the Green Deal climate agenda that she announced at the beginning of her first term in 2019.
Macron, whose government was among the first to introduce a national supply chain law in 2017, said the EU had introduced “a lot of constraints” on industry at a time when it was seeing off “fierce competition coming from south-east Asia and especially China”.
French CEOs and trade lobby groups have been griping about the EU regulation for months, arguing that it handicaps them in global competition by imposing heavy reporting requirements for little real world benefit.
The CEO of a construction and logistics group that carries out projects in the US and Africa said it had begun to track more than 700 metrics to comply with the supply chain directive at a cost of “several million” euros.
In some African countries, compliance was “essentially impossible” because suppliers down the chain could not provide the required information. “Big companies like us can afford to do this, but smaller ones cannot,” the person said.
French banks such as BNP Paribas have also protested against the rules’ application to the financial sector, and earned a partial exemption.
Merz’s stance is a change from the previous centre-left coalition. It put him into an early public conflict with his socialist finance minister Lars Klingbeil who said that the law was necessary but agreed with the commission’s push to simplify reporting requirements.
The difference highlights the increasing ideological divisions over the EU’s green agenda with leftwing politicians trying to hold fast to the letter of the laws that were agreed during the last commission mandate while centre and rightwing lawmakers have called for more deregulation in order to ease pressure on businesses.
One senior EU official said that the commission had “gone too far” given the geopolitical climate and that it would aim to “preserve the foundations” of the rules “so that when we rebuild the house it is still there”.
“The more complex legislation is, the weaker it is,” the official said.
The supply chain law was due to come into force from next year after tortuous negotiations that ended up with the commission’s original proposal being already watered down. It also mandates that companies put in place climate transition plans and strengthens the possibility for NGOs to take legal action against businesses.
“Macron is joining Merz and von der Leyen in sacrificing European values for a race to the bottom with Donald Trump,” said Alban Grosdidier, a campaigner at Friends of the Earth Europe, referring to the US president’s hostility to environmental regulation. It is also “an open invitation” for far-right leaders to seek to “demolish the European Green Deal”.