The EU promised to dismantle regulation in the US model – now a Finnish company is about to get into a strange situation

US president Donald Trump and Elon Musk are not alone in the dissolution of regulation, but now at the end of February, the EU Commission has proposed to relieve companies for their predecessors’ demands on corporate responsibility.

The desire to strengthen the competitiveness of companies by cutting their responsibility costs, but at least in the short term, many Finnish companies seem to have many open questions and unclear situations.

The Corporate Responsibility Directive, approved last spring, had to provide companies with obligations to intervene in human rights and environmental negative impacts in their supply chain, such as the use of child labor.

In the future, the duty of care, ie the responsibility of the company, to find out the human rights and environmental violations would only be limited to the business of the companies, the subsidiaries and the first stairs of the production chain if the proposal of the Commission goes through.

The biggest problems are often much longer in the production chain, which the reform is to cut down. However, the NGO Finnwatch warned the delimitation would threaten to dismantle the entire Corporate Responsibility Directive.

In addition, the Commission wants to release 80 % of companies from endurance reporting, reduce reporting and give extra time to start it. In a new sustainability report, companies need to explain in more detail and comparable ways of their environmental impact and human rights.

A call to Finnish companies shows that reporting reductions are considered welcome, but companies are still convinced by the importance of responsibility work. Reform proposals also leave many open questions to the company.

Will the supply chain get information in the future?

Food company Paulig Director of Responsibility, Safety and Communications Kaisa Lipponen It wonders if the company’s own responsibility work may be difficult if the opportunities for environmental and human rights issues are limited to the supply chain is restricted due to reduced regulations.

The Commission proposes restrictions on what large companies can request from their contractors employing less than 500 employees.

“The biggest effects may not be in our direct suppliers. For us, raw material suppliers can have European companies, but raw materials can come in emerging countries. We will surely want to understand the regulation, regardless of the conditions, ”says Lipponen.

Grocery, building technology and car dealership Kesko Corporate Responsibility Director Harri Spolalander You can also see open questions about access to information and coordinating different requirements.

On the other hand, Spolalander says that the detailed investigation of supply chains will continue in Kesko, as the duty of care is remaining unchanged, for example, in products covered by battery and forest roof settings, such as cocoa, coffee, wood products and car rubber parts. They need to continue reporting even on a daily basis. So, in all respects, regulation is not lighter.

The Commission’s proposal is based on the concerns of SMEs that large companies can request information from them with very varied criteria, says a shareholder who is familiar with the responsibility regulation of the companies Anna Kuusniemi-Laine Attorneys at Castrén & Snellman.

He believes that many SMEs will report in the future with uniform voluntary standards, but it is still open how they fit in with larger companies’ reporting requirements.

According to Kuusniemi-Laine, proposals for reform do not directly reduce the Corporate Responsibility Directive, as the duty of diligence could continue to reach direct contractors in the production chain if there is credible information on the negative effects of the business. However, that too is open, what credible knowledge means in practice.

The Commission’s proposal has also aroused criticism that the Directive would require companies to draw up a transition plan for climate change, but no longer implement it.

“However, companies could not implement their plans if they want to market them to their customers or financiers,” Kuusniemi-Laine estimates.

Did the Finns have a competitive advantage?

So far, some companies have complying with the voluntary commitments of the UN and the OECD on corporate responsibility for environmental and human rights issues. The EU Corporate Responsibility Directive would have made the content of these commitments compulsory for all major companies. Indeed, the reduction of the Directive has also sparked a debate on whether the Finnish companies who have invested in responsibility are now competitive.

Regulation alone does not bring a competitive advantage, Lipponen thinks.

“On the other hand, it is miserable that the demands are not the same for everyone. This will leave room for free travelers who can continue to operate without using resources to combat climate change and promote human rights, ”he says.

In Lipponen’s view, the Commission’s proposals should not be interpreted that the weight of sustainable development is decreasing.

“The sustainability crisis is still real. For many companies, the risks and opportunities associated with climate are already everyday, regardless of the Commission’s proposals. ”

Kesko’s Spolalander hopes that the responsibility targets will not be watered by the EU.

“While sometimes uncommon requirements can be frustrating, it is comforting that this is how the right things are talking about and aims to improve the responsibility of value chains from an environmental and human rights perspective.”

Commission says one, the law another

More open questions are related to endurance reporting. Finland has already brought the EU’s previous EU requirements, according to which large listed companies must draw up their first new sustainability reports for 2024 and the next large -scale non -listed large companies from 2025.

However, at the end of February, the EU Commission proposed an exemption from reporting for unlisted companies employing less than a thousand people, and a couple of years of additional companies such as Paulig.

According to Lipponen, Paulig has been preparing for a sustainability report from 2025 since last year, as the Finnish law requires. He says that preparation will continue to be formerly model despite the Commission’s proposals.

According to Lipponen, reporting is currently inappropriately detailed, but he sees the company in the big picture.

“It helps to guide responsibility work better. That work will not be wasted in any way, even if there are still changes. ”

In an unclear situation, large companies employing less than a thousand people and subsidiaries operating in Finland who have assumed that their parent company is reporting. If the parent company’s home country does not need to be reported for this year, the subsidiary in Finland should still make its own report.

Deploying the schedule serves companies in countries that have not yet brought reporting requirements to the law, says Kuusniemi-Laine. Such countries include Germany, Spain, Austria and Portugal. Reporting takes time and money from companies.

According to Kuusniemi-Laine, the situation may be unclear for months. The Commission’s exits are only proposals, and their details are still discussed in the EU Parliament and the Member State Council before approval. After that, Finland’s national legislation must be amended.