The controversy surrounding Directive 2024/1760 began with a report by a little-known body of the European Commission in Brussels. Five senior officials and four external experts were to assess the impact of the planned law – how much it would cost European companies and how much bureaucracy it would create. As a rule, this is a formality. But not this time.
Directive 2024/1760 concerns the European Supply Chain Act, one of the most controversial legal acts from Brussels in recent times. EU countries are to implement it from next year. Under it, larger companies will then have to ensure that their business partners in remote parts of the world do not exploit workers, pollute rivers or deforest. Many politicians and managers criticize this directive, claiming that these provisions are practically impossible to comply with.
Already in spring 2021 – well before the current debate on this topic – the European Commission's Regulatory Scrutiny Committee expressed its concerns.
Its nine members found that the European Commission's own impact assessment of the implementation of this directive contained serious shortcomings. In their opinion, the costs and benefits of the Supply Chain Act were not “sufficiently presented” at the time. Commission President Ursula von der Leyen nevertheless supported the directive.
This is a peculiar situation. According to its statute, the European Commission must analyze the effects of the regulations it plans. However, the quality of the reports – Brussels officials call them “impact assessments” – often seems questionable. What's worse: they are often not prepared at all.
Last year, the European Commission introduced 123 directives and regulations and adopted over 1,000 legal acts of a rather technical nature. However, it has only prepared 25 impact assessments, according to a previously unpublished study by the industry association Gesamtmetall, seen by Die Welt.
This means that Ursula von der Leyen's agency often drafts bills blindly. Without cost-benefit calculations and without a clear understanding of what consequences these legal acts may entail for Europe's 30 million businesses and 450 million citizens.
Lack of systematic control
— Impact assessments of planned legal acts are particularly necessary and sensible in the EU, because they concern 27 different legal systems of the Member States, says Oliver Zander, CEO of Gesamtmetall. Cross-border regulations or regulations affecting the entire internal market are also often adopted. — Therefore, the lax approach to impact assessments at EU level is surprising, wrong and dangerous, Zander criticizes.
Just 25 impact assessments last year – is this how politics should be done? Is this the right course of action for an executive whose decisions affect the daily lives of people across the continent?
— This number should not be mechanically compared with the number of all Commission legal acts, replies the European Commission spokesman. He believes that the vast majority of regulations only regulate technical details and do not impose any burden on anyone, so full impact assessments are unnecessary in this situation. — They are drawn up where political decisions need to be made and where significant economic, social or environmental impacts are expected [uchwalanych aktów prawnych] – he adds.
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Often, the European Commission actually only regulates details – for example, in which form a company must enter CO2 emissions. For this purpose, it uses the so-called implementing acts. Apart from them, over 100 directives and regulations were adopted last year – provisions with real consequences for countries and people. There is therefore no question of a systematic review of EU legislation.
Businesses in the EU don't have it so easy. Under the new directive, they must report all possible information to the European Commission – for example whether an Indian supplier is pouring toxic chemicals into the Ganges. How much carbon dioxide was produced during the production of a screw imported from Malaysia. It appears that “impact assessments” carried out by companies must meet higher standards than those in Brussels.
There are voices in political circles demanding a change to this practice. — Those who create regulations must prove their effectiveness. Good intentions alone are not enough, says FDP MEP Moritz Koerner in an interview for “Die Welt”. Every regulation costs freedom, time and money. Therefore, it must bring tangible added value. The European Commission must demonstrate that the benefits of a given regulation outweigh the potential social and economic harm. Otherwise, EU policy will become paternalistic and detached from reality, Koerner fears.
Political objections
The impact assessment rule has existed in the EU since 2002. Previously, officials in Brussels would sometimes commission a study or expert opinion, rarely containing precise figures. The first 50 years of European integration – from the European Coal and Steel Community to the Treaty of Nice – passed largely without any analysis of the economic consequences.
But why does this happen even today? Political considerations seem to play a role in this. For example, in early 2024, farmers across the continent organized protests – in Brussels, they even set fire to tires and dumped manure in front of the European Commission building. Shortly thereafter, the authorities relaxed environmental regulations on agriculture – simply, without any impact assessment. An internal document said it was abandoned due to “political urgency.”
When analyzes of regulatory data are available, they are often unclear. How much will the deforestation regulation, which aims to help the EU economy help protect jungle areas in Asia and South America, cost companies? EUR 158 million (PLN 671 million), but it may also be EUR 2.35 billion (approx. PLN 10 billion), write European Commission officials. What about the Artificial Intelligence Act? Here they give a range from EUR 100 million to EUR 3 billion (from PLN 425 million to PLN 12.7 billion). It's as if a craftsman said that repairing a washing machine would cost from 300 to 9,000 euros (from PLN 1,274 to 38,000).
A disturbing picture emerges from all this. Sometimes Brussels impact assessments have little informative value, as in the case of the Supply Chain Act. Sometimes they are completely missing for political reasons, for example because farmers are an important constituency for many European politicians. Sometimes the analysis is unclear, as in the case of regulations on artificial intelligence and deforestation. And the European Commission would prefer not to publish some analyzes at all.
In spring 2023, an NGO working on the influence of lobbying groups on European institutions wanted to see a classified impact assessment on the review of the EU Chemicals Regulation. However, the commission released a heavily censored version of it in order, it said, to protect the “business interests” of the study's external authors. The then EU Ombudsman, Emily O'Reilly, found this justification unconvincing and accused the office of “improper administrative action.”
The European Commission is clearly aware of the problems associated with impact assessments. — We are strengthening our regulatory system. More impact assessments will be carried out in the future, her spokesman said. The aim is to analyze each law implemented more carefully in terms of its practicality. So it seems that Brussels is already aware of the problem. The only thing missing is a step towards improvement.
I’m Ashley Davis as an editor, I’m committed to upholding the highest standards of integrity and accuracy in every piece we publish. My work is driven by curiosity, a passion for truth, and a belief that journalism plays a crucial role in shaping public discourse. I strive to tell stories that not only inform but also inspire action and conversation.
