In search of a balance: EU’s environmental standards in a competitive world

Mai Hoa
GITT

March 23, 2025

“With words of encouragement, a few birds pluck up courage, joining the line behind Kingfisher and Sham-bird. In unison, they call out Snake.”

—In “The Virtue of Sacrifice”; Wild Wise Weird [1]

[COMMENTARY]

The European Union (EU) has positioned itself as a global leader in advancing environmental standards, aiming to hold corporations accountable for their global supply chain impacts. A key legislative effort in this regard is the Corporate Sustainability Due Diligence Directive (CSDDD), which mandates large companies to identify and mitigate adverse human rights and environmental effects linked to their operations [2].



However, the ambitious regulatory framework faces growing resistance. France recently called for an indefinite suspension of these rules, citing excessive administrative burdens that could hinder business competitiveness. Critics argue that such stringent requirements could place European companies at a disadvantage compared to counterparts in markets with less rigorous oversight, such as the United States and China [2].

Despite these concerns, research underscores the limitations of voluntary sustainability standards (VSS) in ensuring responsible corporate behavior, reinforcing the need for legally binding regulations [3]. The French Duty of Vigilance law serves as a pioneering example, establishing corporate liability for violations occurring within global supply chains. While it has led to improved due diligence practices, the law still allows companies significant leeway in interpreting compliance, leading to inconsistencies in transparency and accountability [4].

One of the most significant challenges to the EU’s regulatory impact is “supply chain divergence.” This practice enables producers to tailor their outputs to different markets, selectively applying sustainability standards where required. Such fragmentation weakens the “Brussels Effect,” whereby EU regulations set global benchmarks due to the bloc’s economic influence and regulatory capacity [5]. This trend is particularly evident in agricultural supply chains, where human rights violations and environmental degradation remain pressing concerns.

To strengthen its regulatory impact while preserving economic competitiveness, the EU needs to pursue a more integrated approach. Key strategies include fostering international regulatory alignment, expanding due diligence obligations to financial stakeholders, and complementing strict “do no harm” policies with proactive “do good” initiatives. Such measures could enhance sustainability efforts while ensuring businesses remain viable in the global market [5].

In light of the above view, while the EU’s environmental standards mark a significant step in global governance, their success depends on balancing regulatory ambition with economic pragmatism. By refining its approach and collaborating with global partners, the EU can strengthen corporate accountability without compromising its competitive edge [6-7].

References

[1] Vuong QH. (2024). Wild Wise Weird. https://www.amazon.com/dp/B0BG2NNHY6/

[2] Courthouse News Service. (2025). France asks EU to delay rights, environment business rules. https://www.courthousenews.com/france-asks-eu-to-delay-rights-environment-business-rules/

[3] Partiti E. (2022). The place of voluntary standards in managing social and environmental risks in global value chains. European Journal of Risk Regulation, 13(1), 114-137. https://doi.org/10.1017/err.2021.34

[4] Schilling-Vacaflor A, Gustafsson MT. (2024). Towards more sustainable global supply chains? Company compliance with new human rights and environmental due diligence laws. Environmental Politics, 33(3), 422-443. https://doi.org/10.1080/09644016.2023.2221983

[5] Bastos Lima MG, Schilling-Vacaflor A. (2024). Supply chain divergence challenges a ‘Brussels effect’ from Europe's human rights and environmental due diligence laws. Global Policy, 15(2), 260-275. https://doi.org/10.1111/1758-5899.13326

[6] Nguyen MH. (2024). How can satirical fables offer us a vision for sustainability? Visions for Sustainability. https://ojs.unito.it/index.php/visions/article/view/11267

[7] Vuong QH, Nguyen MH. (2025). On Nature Quotient. https://dipot.ulb.ac.be/dspace/bitstream/2013/390547/3/wp25003.pdf