The cartoon character Wile E. Coyote runs off a cliff, keeps running in thin air, looks down, realises there is no ground beneath him — and ultimately falls. A classic cartoon scene.
For five years, EU politicians and officials have been running to make companies transparent about their green efforts (the Corporate Sustainable Reporting Directive, or CSRD). But by delaying it and watering it down, they have now run off a cliff. Just like Wile E. Coyote.
Look where you are running
Since the Green Deal in 2019, Brussels has steered the EU towards clear reporting rules. Businesses have invested in people, training and resources to enable them to comply. They have planned their production. They have told their employees that this is a good thing, helping them become greener, cleaner and better.
But now, Brussels is scared of its own shadow. On April 3, the European Parliament voted to delay the CSRD by two years and exempt most EU businesses altogether.
This decision could have dire consequences. Business experts and lawyers, for example, told the Financial Times that the uncertainty will undermine investment in the EU. Investors warned it could have negative consequences for the EU’s Clean Industrial Deal.
Also, changing the rules like this punishes innovative companies and rewards the laggards. This view is shared by a wide array of stakeholders, including consumer brands and manufacturers.
Having messed up its own rules, the Green Deal is suspended in thin air.
Here comes the cliff edge
For example, less than a week after the Clean Industrial Deal, the EU relaxed its carbon emission controls on new cars. “It’s a terrible, terrible decision by the EU. It destroys trust… Everybody knew the rules, everybody knew what was required,” the boss of Volvo Cars told the FT. “Sustainability makes us more competitive” by reducing energy consumption and boosting productivity, said the boss of another industrial group.
Many of the biggest chemicals producers agree. Numerous companies have already prepared their CSRD disclosures, and see this as giving them a leading position or competitive advantage. Akzo Nobel, for example, has already reported in line with CSRD rules, as has Covestro.
Now, all this work has apparently gone to waste.
Accountants PWC state that companies see multiple business benefits flowing from sustainability reporting under CSRD. Only last summer, a staggering 97% of professionals at global companies said they felt ready to report under CSRD by 2025.
CSRD “is not merely a reporting process. It’s an essential strategic tool – a vital investment in understanding future resilience and competitiveness,” says international law firm Mishcon de Reya.
Can Wile E. Coyote avoid the fall?
Having messed up its own corporate reporting rules, the Green Deal is suspended in thin air. Like Wile E. Coyote, it has run straight off the regulatory cliff.
Business requires certainty – to plan, to invest, to innovate, and to grow. Having destroyed it, Brussels must restore predictability. Abandoning CSRD punishes those companies that have already aligned their businesses with its rules.
To get back to safety before gravity takes over, it must get back onto solid ground. The alternative is to plunge down into an abyss of uncertainty.
