IR Notes

On 26 February, the European Commission put forward two so-called “Omnibus” packages of measures, seeking to restore competitiveness to European companies by reducing the cost of their administrative burdens by “more than 6 billion euros”, thanks to a revision of the directives on due diligence (see Due diligence), on corporate sustainability reporting obligations (see Sustainability reporting), and of the taxonomy regulation, i.e. the flagship texts of the Green Deal adopted during its previous term (see European Green Deal). These measures are the outcome of strong pressure exerted on MEPs and governments by employers. As early as 2023, a majority of MEPs voted down a draft resolution to reject the delegated regulation presented by the Commission, which sets out the EU sustainability information standards (Environmental and Social Reporting Standards – ESRS) applicable to sustainable development reports (see IR Notes 217). At that same time, in its work programme for the term in question, the new Commission promised to enact a 25% reduction in the cost burdens associated with citizens’ and companies’ obligations to submit declarations, “without lowering social, environmental or economic standards” (see IR Notes 217). In March 2024, after the Council had rejected the compromise text on the proposal for a directive on due diligence, the Council and Parliament finally reached an agreement allowing it to be adopted, by sacrificing some of the ambitions set out in the proposal (see IR Notes 226). However, its opponents did not admit defeat. They kept up their intensive lobbying, citing Mario Draghi’s report on the future of European competitiveness, and prompted the Commission to put forward an emergency revision of these two texts (see IR Notes 236). The “Omnibus” package is therefore designed to water down the ambitions of EU legislation in the areas of sustainability reporting, taxonomy and due diligence. So, several years of preparation and democratic process are now being brushed aside, as if these texts were the result of collective blindness and they went some way towards explaining why the EU is lagging behind the USA in terms of competitiveness.
Admittedly, in a handful of the 300 pages making up his report, Mario Draghi referred to the red tape created by these pieces of legislation, thanks in particular to a number of inconsistencies and duplications. However, the thrust of his message was a plea for a genuine industrial strategy, a capital markets union and a substantial increase in investments, including public investments, enabled via European borrowing. The Commission is proud of its work on unravelling existing legislation, and sees its “Omnibus” proposal as “a major step forward in creating a more favourable business environment to help EU companies grow, innovate, and create quality jobs”.
However, this initiative has incurred the wrath of trade unions, and NGOs are even more angry, as they have been removed from the definition of stakeholders. The employers’ organisations are the only ones who are satisfied (see below). This is an ideological victory though, and they will struggle to persuade many companies of its benefits, especially those companies that have committed to demonstrating their sustainability credentials in order to secure financing by convincing investors.
As for workforce representatives, their rights do not appear to be affected for now. Nevertheless, many of these representatives no longer come within the scope of these directives, which were supposed to grant access to information currently denied to them. As for those workforce representatives to whom the directives do still apply, they are expected to lose access to a series of indicators (the Commission promises simplification and fewer items to be monitored), and in all likelihood they will be less closely involved in the various preparation phases associated with sustainability reports and risk mapping (the Commission mentions that stakeholders will be involved in situations where they are essential).
The proposals will now be submitted to the European Parliament and to the Council for scrutiny and adoption. The Commission says that the amendments concerning the CSRD and the CS3D will have to be given priority and that they “will enter into force once the co-legislators have reached an agreement on the proposal and after publication in the EU official journal”. The leadtimes for adoption will be short, in order to “address the main issues identified by stakeholder feedback”. As a result, this simplification will not happen immediately, especially since Parliament will probably not be very keen on the idea of once again undoing laws that it fought hard to introduce. Unless the EPP’s MEPs play the populist card by joining forces on this occasion with the far-right parties? Lastly, as the CSRD directive has already been widely adopted by Member States, governments will have to embark on a legislative process in order to trim down its scope in their own legislation. Can these changes really be described as simplification?

Industrial strategy and restructuring : On 26 February, the European Commission published a communication on the “Clean Industrial Deal”, which contains a series of measures aimed at boosting the competitiveness of European companies, by helping to decarbonise the economy and cut energy costs, while at the same time protecting the Union from unfair competition. The initiative responds in part to the demands made both by the trade unions (see ETUC and IndustriAll Europe press releases) and by the employers (see BusinessEurope and Ceemet press releases). The communication makes reference to the future “Quality Jobs Roadmap”, which is designed to provide “support to workers in transitions”. Thus “the Commission will discuss with social partners a framework to support restructuring processes at EU and Member States level. The framework will be focused on just transition, on anticipation of change, quicker intervention when there is a threat of restructuring, and an improved information and consultation framework” (see press release and Restructuring). Here, the employers’ organisation representing the metal-working industries, Ceemet, has stated that although it supports “a Just Transition Framework negotiated and agreed upon by the social partners, we believe existing national and EU legislation already address collective redundancies and the restructuring process, making additional EU measures in this field unnecessary” (see press release).

Simplifying sustainability reports : Do sustainable development reports represent an excessive burden for companies, and especially for SME? Never mind, the Commission is now planning to trim them back with its chainsaw, by raising the threshold workforce size of the companies concerned. Consequently, as indicated in the proposal for a directive amending Directive 2022/2464 of 14 December 2022 on corporate sustainability reporting (the “CSRD directive”), only companies with more than 1,000 (rather than 250) employees and a turnover exceeding 50 million euros, or a balance sheet value exceeding 25 million euros, now remain within the directive’s scope of application. This means that around 80% of the companies concerned have been removed. Companies with fewer than 1,000 employees would be invited to adhere to “proportionate and simplified standards” for voluntary use. The largest companies would have to draw up a report based on the first set of ESRS standards, as originally planned, but these standards will also be watered down (at this stage though, it is not known exactly which standards will be sacrificed). The idea is to “substantially reduce the number of ESRS datapoints by removing those deemed least important for general purpose sustainability reporting”, says the Commission staff working document. The Committee also plans to postpone by two years (to 2028) the reporting requirements for companies that are currently within the directive’s scope and will have to submit a report from 2026 or 2027 onwards (see proposal for a directive as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements). Limitations are also introduced in terms of information gathering within the supply chain.

Reducing due diligence requirements : Directive 2024/1760 of 13 June 2024 on corporate sustainability due diligence (the “CS3D” directive), which has barely entered into force, is now being dismembered by introducing changes requiring the companies concerned to assess only their direct business partners (first-tier suppliers). This means that under the proposal for a directive, beyond the first tier, companies would have to assess a supplier only when they were in possession of plausible information suggesting the existence of actual or potential negative effects within the supply chain. As the Commission staff working document explains, “focusing the due diligence obligations on direct business partners significantly reduces the material scope and the possible burden for companies in scope as well as the trickle-down effect on business partners, in particular SMEs and small mid-caps both in the EU and beyond”. In their risk mapping work, companies would have to limit the information they request from their direct business partners (SME employing no more than 500 employees) to that specified in the voluntary standards applicable to preparing sustainable development reports (VSME standards), as provided for by the revised CSRD directive. In the event of a serious violation, companies would no longer be obliged, in the final instance, to end the business relationship with their supplier, but to suspend it. The Commission also wants to revise the notion of “stakeholders”, “by simplifying the definition and limiting it to workers and their representatives, and to individuals and communities whose rights or interests are […] or could be […] ‘directly’ affected by the products, services and operations of the company, its subsidiaries and its business partners”. This text appears to sideline NGOs. It reduces the required frequency of periodic monitoring exercises and assessments of companies’ business partners from one year to five years. Lastly, the Commission is also playing for time by deeming it necessary to grant companies more time “to prepare for compliance with the new requirements” by deferring the application of due diligence requirements for the largest companies by one year (to 26 July 2028), while at the same time advancing (to July 2026) the deadline for adoption of the guidelines (see proposal for a directive as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements).

Reactions of European social partners : The European Trade Union Confederation (ETUC) believes that the proposal will weaken “mechanisms designed to hold companies accountable to the abuse of workers in their supply chains” (see press release). Isabelle Schömann, ETUC Deputy General Secretary, is highly critical: “This is not simplification. This is deregulation”, she says. “These two pieces of human rights legislation are the fruit of years of consultation, of analysis and of negotiations. As well as being inefficient, going back on the results of this process is deeply undemocratic.” She argues that the proposal “is the result of a rigged process in which the European Commission invited five times as many corporate lobbyists as representatives of trade unions or NGOs to its ‘consultation’”. Among employers, the mood is one of satisfaction, and there are calls to go even further. “Proposals to address the imbalances in the material scope and liability under the CS3D mark major steps forward”, says Markus J. Beyrer, BusinessEurope Director, who is happy with this development (see press release). He continues: “Moreover, it is welcome that there will be a significant reduction in the amount of data to be collected, certified and published annually under the CSRD as they represent tangible simplification efforts, without calling into question the objectives”. Nevertheless, “more efforts must be made to ensure a harmonised approach to Due Diligence to avoid fragmentation down the line”.

Algorithm transparency : On 27 February, the Court of Justice delivered a judgment in a case brought by a consumer against a telephone operator that had refused to grant her a mobile telephone contract, on the grounds she did not have sufficient financial creditworthiness. As the decision was based on an algorithm, the Court of Justice held that the controller “must describe the procedure and principles actually applied in such a way that the data subject can understand which of his or her personal data have been used in the automated decision-making at issue, with the complexity of the operations to be carried out in the context of automated decision-making not being capable of relieving the controller of the duty to provide an explanation.” This solution also applies to labour law disputes if an employer’s decision is the result of an automated decision made by an algorithm. This ruling demonstrates that if the Commission refuses to draw up a law overseeing algorithmic management within companies, the Court of Justice will deal with this issue (see press release).

Civil aviation : On 7 November 2024, European social partners in the civil aviation sector adopted a joint statement on equality between men and women. It emphasises that women are under-represented among pilots (5.2%) and in ATM (air traffic management), maintenance and ground handling activities. The signatories believe that the issue of gender balance should be a “high priority”. To this end, they commit to promoting these careers to women, and also to rethinking work organisation, by offering them flexible work hours, part-time job arrangements and addressing maternity needs. The text cites the example of Turkish Airlines, a company that has extended legal maternity leave from 16 to 20 weeks and offered the opportunity to work part-time until children reach primary school age (see ETF press release).

Democracy at work : “If there is no democracy at work, then democracy is incomplete”. This is what the Minister of Labour and the Social Economy, Yolanda Diaz declared on 20 February, as she marked the launch of a committee of experts tasked with proposing ways of strengthening democracy at work. This committee is chaired by Belgian sociologist Isabelle Ferreras, who is Research Director at FNRS, Research Associate at Harvard and Oxford, and Professor of Sociology at the Catholic University of Louvain (see press release). This committee’s mission is to put Article 129.2 of the Constitution – which describes various forms of worker participation in the company, cooperatives and granting workers access to ownership of the means of production – into practice. Sara Lafuentes, who is a researcher at the European Trade Union Institute (ETUI) and a member of this committee, explains: “On this basis, the legislator has regulated the process of informing and consulting workers, and participation in the social economy, but no laws have been passed on any form of financial participation or employee representation on company boards.” Following an initial abortive attempt to debate this subject in Parliament (see article in Social Europe) in 2024, Yolanda Diaz then embarked on a new initiative, in which she commissioned a number of experts to produce a two-part report, to be submitted in September. One of these two parts aims to produce diagnostics based on scientific literature, with a view to understanding what contributions employee participation in company decisions can make to solving many different crises, such as the ecological crisis.  “The other part”, says Sara Lafuentes, “involves putting forward solutions in the form of legislation, with objectives to be achieved and measures allowing them to be discussed subsequently with social partners, within the framework of tripartite dialogue social, ahead of coming up with a draft law”. This initiative is entirely in keeping with Gabriele Bischoff’s parliamentary report on democracy at work, adopted in June 2021, and the conclusions on democracy at work and green collective bargaining approved in November 2023, by the Council of the EU, at Yolanda Diaz’s initiative. The review of scientific literature on the benefits of democracy at work, which will be undertaken by experts from several countries, might pave the way for broader thinking and a broader public debate on democracy at work in Spain, and serve as a basis for work by trade unions from other Member States, who are seeking better participation in company decisions.

Collective bargaining agreement for the electricity sector : On 11 February, social partners in the electricity sector approved the renewal of their sectoral collective bargaining agreement for the period 2025-2027. The agreement, which covers 60,000 employees, provides for a revaluation of minimum wages “that adequately offsets the effects of inflation in recent years”, according to the three signatory trade unions, and for a reduction in working hours. The three half-days of “afternoon freedom” now become three full rest days. The personal training entitlement for employees is also being increased, from 40 to 45 hours in 2026, and subsequently to 50 hours in 2027. A further innovation is an obligation to provide information to workers and to consult with them at company level on the topic of artificial intelligence, before any decisions are taken. This subject is also added to those being dealt with by the sectoral observatory with equal representation of management and employees. Other topics include issues related to the energy transition, the new scenarios arising from decarbonisation and policies for combatting climate change. The signatories are also extending the leave granted to victims of gender-based violence and harassment from 6 to 12 months. They will continue to be paid during this time. The provisions covering facilitation of access to telework and part-time working remain unchanged.

Negotiations within healthcare groups : The first negotiation meeting for the purpose of setting up a European Works Council within the Norlandia group (4,000 employees) was held in Oslo, in mid-February. Norlandia has employees in Finland, Norway and Sweden. A negotiation is also due to be finalised within the French healthcare group Colisée, which manages homes for the elderly (see press release). These negotiations form part of a plan being pursued since 2020 by the European Public Service Union (EPSU), which wants to establish EWCs within large private-sector healthcare groups.

Absenteeism : The management of Clariane (60,000 employees) and its European company’s works council (SE works council) have compiled a guide to good managerial practice, which is aimed at combatting absenteeism. The guide is organised around five themes: work organisation, managing absences, consideration given to staff teams, the atmosphere at work and prevention-health and safety. When it comes to managing absences, for example, the guide recommends calling, every Friday afternoon, staff who are on temporary or fixed-term contracts and are scheduled to be working over the weekend, to check they will be coming in. Another suggestion is to identify peak periods of absence and to cross-reference that data with events occurring on site. Among other things, these recommendations draw on the experience of managers who have successfully reduced absenteeism on sites they run in France and Germany. The guide has been translated into all languages and distributed in all countries. It was produced by a dedicated task force, set up following the joint declaration on reducing absenteeism, which the SE works council adopted in 2022.