Simplification, not Deregulation: Green proposals for bureaucracy reduction

European companies are facing a number of challenges that impact their competitiveness. Acute issues include high energy prices, upcoming trade wars and unfair competition from heavily subsidised products from China. These issues are externally driven: pushed by the Russian war of aggression against Ukraine, the new US administration and the aggressive industrial policy of China. However, another set of competitiveness levers are fully under our control, including the need for public investment, efforts to reduce our supply chain vulnerabilities, and the reduction of bureaucracy. Excessive bureaucracy is not the root cause of our competitiveness problem, but it is certainly an obstacle we can overcome more easily than others.

Lighten the load: how to simplify regulations without compromising on protections for people and the planet

Bureaucracy in itself is necessary in a modern state: it creates legal certainty, important for companies and citizens alike. Regulations protect consumers, the environment, human rights, and our social model: they are what enable our European way of life. Nonetheless, rapid changes, as well as the complexity of the European institutional mille-feuille have resulted in overlapping obligations, which frustrate many companies on a day-to-day basis and create significant costs.

The slow pace of digitalising administrative processes, especially in Germany, is also a major problem. It is not individual legal provisions that are perceived as a bureaucratic burden, but rather the multitude of regulations and their interplay. We Greens are at the forefront of efforts to simplify rules, starting with the actual experience of practitioners. The German BMWK has been leading efforts towards a new fact-based approach to bureaucracy reduction: practice checks, starting from real problems faced by practitioners. This approach is the best suited to identify duplications and inconsistencies. We call on the Commission to implement practice checks at EU level instead of leading a blind bonfire of rules.

Simplification does not mean deregulation

Simplification is not a new topic. In many areas, Greens are leading the simplification efforts.

• Permits for renewable energy: the entire permit-granting process for large renewable energy projects used to take up to 9 years in some Member States. Both in Germany and at European level, the Greens are championing simplification and streamlining of permitting processes for renewables

• Simplify and digitalise customs procedures: often businesses importing or building products in the EU have to deal with customs thousands of times a year, but have to face 27 systems and multiple authorities checking if goods respect European legislation. The Greens have been long-time spearheads of the reform of customs, centralising, digitalising and streamlining processes.

• Simplify state aid and research funding: the EU currently have a very complex landscape of overlapping state aid frameworks, like the TCTF, IPCEIs, Innovation Fund and Regional state aid. These have different rules and conditions, and are all very intransparent and complex. It often takes years for companies to receive state aid, they do not know at the start of the process how much they will get and the rules are interpreted on a case-by- case basis. What we need is an alignment of rules between various funds, and clear rules on how much state aid companies can get, for instance per Kg of green hydrogen, or per watt of solar. The process needs to be drastically shortened in duration and needed steps for it to be effective.

• Simplify financial reporting: the reporting burden on companies is mostly due to financial reporting. Financial reporting requires over 3000 data points. There is a huge fragmentation across EU member States, resulting in single market barriers and excessive administrative costs. Harmonised templates for reporting across member states are necessary to greatly lighten the load on individual companies.

• Limiting reporting obligations for SMEs and midcaps requires preventing large companies from shifting the burden to their suppliers. Many SMEs are facing growing requests for sustainability information – typically from banks that lend them money and the large companies they supply. The burden on SMEs can be limited immediately by generalising a standardised and simplified way to report to larger companies. This standard should also be applied in the context of the German due diligence law, which is the source of most burden shifting on SMEs. This is achievable without weakening the rules.

• Prevent consulting and audit companies from building a business model on over-compliance, and simplify auditing: Sustainability audits help to ensure that reported information is accurate and reliable. However, it currently represents 50% of the cost of compliance with the laws, like the sustainability reporting directive (CSRD). The Commission should immediately clarify the boundaries audit firms must respect. Separating sustainability audits from financial audits could also help limit their cost, and prevent conflicts of interests.

Simplification is possible, without harming regulations that protect people and the environment.

On limiting bureaucratic burdens, our guiding principles are:

• Reducing bureaucracy requires more Europe, not less. New rules regulating the internal market are not additional, they come to replace existing national ones. Having to deal with 27 sets of rules is the worst bureaucratic burden for business hoping to scale up. One priority is to ensure that European rules are transposed properly by Member States. Removing European rules is not simplification, for instance: the upcoming fist package on simplification (a.k.a first Omnibus) will end the single European civil liability regime for human rights violations in value chains, and replace it by 27 different regimes.
• Reducing bureaucracy is a question of resources: public authorities, including the Commission, suffer from an acute shortage of staff, which contributes to procedures running too slowly. By advocating for tax justice, new own-resources for the Union and by fighting austerity both at European and at national level, we fight administrative bottlenecks. The digitalisation of bureaucratic processes is absolutely necessary for simplification, but requires significant budgets.
• Delegated acts and guidelines are central in the simplification process: delayed guidelines and delegated acts create major headaches and worries for European businesses, like in the case of the anti-deforestation regulation. Without them, uncertainty and the burden of compliance skyrockets. The EU needs a more structured approach to implementing legislation.

Enhancing the EU’s competitiveness can only be achieved by acknowledging the efforts of businesses that are at the forefront of implementation, rather than rewarding those who were slower to adapt or wish to slow down the transition. Simplification is a worthwhile priority for the EU, but it must not come at the cost of the European Green Deal.

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