Too much bureaucracy

EU supply chain law to be put to the test

The EU Commission actually wants to reduce bureaucracy, but a number of new regulations are currently in the pipeline.

(Bild: EPA)

While the EU is losing economic power, growth is taking place in the USA and China. Many companies see the massive bureaucracy as a major burden. The EU Commission wants to present its plans to reduce the burden this week. In an interview with "Krone", top Austrian managers speak out against the Supply Chain Act and other bureaucracy monsters.

It has already been passed, but there is growing hope in the business community that politicians will tighten up and ease the supply chain law. As things stand, companies will be responsible for complying with certain standards in their supply chain from mid-2026. This is intended to strengthen environmental protection and human rights. There is nothing wrong with the objectives, but since the directive came into force, numerous business representatives have criticized its practical implementation.

Proposal for a "block list"
"Monitoring should be a task for the state. But politicians are simply passing it on to the companies," criticizes Günther Ofner, head of Vienna Airport. At the same time, thousands of companies are supposed to check thousands of suppliers to see whether they are adhering to standards.

Roman Billiani, a board member of Mayr-Melnhof Karton AG, also has little sympathy for this. He suggests introducing a block list. "All suppliers from third countries that do not comply with European standards should appear on the list," says the manager. Verbund boss Michael Strugl, industrialist Kari Ochsner, Porr boss Karl-Heinz Strauss and Ofner are also in favor of this plan in a joint initiative.

Billiani fears that many large companies would thin out their supplier relationships with the current regulation. "With this effort, many will try to rely on a few large suppliers. This will naturally affect the smaller ones". Although the EU emphasizes that the Supply Chain Directive only affects large companies, numerous smaller companies are also listed in the very complex supply chains, which are then confronted with the bureaucratic rules.

(Bild: Krone KREATIV)

Another danger: as China and the USA have less stringent regulations, they could then do the business that European companies miss out on due to overly complicated regulations. "We can already see that China and the USA have caught up significantly. If Europe doesn't finally do something about this excessive bureaucracy, this will continue," says Ofner. In fact, around 30 years ago, Europe and the USA were on a par in terms of their share of global economic output, with China far behind. In the meantime, the EU's economic power has clearly shrunk in proportion. It is now on a par with China and a full 35 percent behind the United States.

EU Commission presents plans this week
However, the EU Commission has at least already publicly admitted that the reporting obligations are too high and has announced a 25% reduction in bureaucracy. Plans will be presented this week. Fewer reporting obligations, a relaxation of competition rules and changes to the Supply Chain Act are said to be imminent.

One proposal would be a block list of companies that do not meet EU standards.

Mayr-Melnhof-Karton-Vorstand Roman Billiani

Bild: Mayr-Melnhof Karton AG

"If the EU is really serious about reducing bureaucracy, it will have to cut back and significantly reduce some of the laws that have already been passed. In any case, no new regulatory initiatives should be taken until the 25 percent mark is reached," says Ofner.

Commission President Ursula von der Leyen wants to create an omnibus regulation that brings together a number of bureaucratic issues. "As things stand, bureaucracy is only getting more and more. It should actually be decreasing as a matter of urgency," says the airport board member.

However, there are currently also signs that the last word has not yet been spoken on the supply chain law that has already been passed. Most recently, the German Green Minister for Economic Affairs, Robert Habeck, also spoke out against the plans and considers the Supply Chain Act to be excessive in its current form. Just a few days ago, French Minister Benjamin Haddad also came out strongly against the law, meaning that two of the EU's economic giants are already in favor of renegotiations.

The signs also changed in Austria in January. In the tripartite negotiations, a critical stance on the Supply Chain Act had still failed due to the SPÖ, whereas the FPÖ and ÖVP are against "location-hostile" provisions in the law. Ofner and Billiani hope that the future government will advocate less EU bureaucracy in the Council.

Entire departments in companies are occupied with sustainability reports.

Flughafen-Chef Günther Ofner

But it's not just the Supply Chain Act that is becoming overly bureaucratic. The numerous reporting obligations in terms of sustainability are also a thorn in the side of business. "Entire departments are now dedicated to writing these reports," says Ofner. Even if sustainability reporting were to be completely abolished, the reporting obligations in Europe would still be much stricter than in the USA, for example, due to company law.

EU is world champion in regulation
Billiani also criticizes the deforestation regulation and hopes that it will be discussed again. The European People's Party recently urged that it be postponed. "The excessive requirements are a competitive disadvantage for European companies," says the packaging giant's CEO. While other countries are already pushing down burdens for companies, Europe is still waiting - partly because it is still in too comfortable a position.

Ofner calls for "gold plating" (overfulfilment of EU directives) to be eliminated and reporting obligations to be reduced". There are currently another 400 new pieces of legislation in the pipeline from Brussels. Over the past five years, around 5500 new legal acts have been issued in the USA. In the EU, on the other hand, officials have drafted and adopted more than 13,000 legal acts.