Top two EU Priorities 2022
With Covid receding and the new year 2022 in full swing, we take a look at why sustainability and digitalisation are the two main policy priorities for the European Union this year.
Looking at the agenda for the EU institutions for 2022, two topics in particular stand out as priorities. These are digitalisation and sustainability and in the next few paragraphs we’ll take a look at what that entails.
If we look first to sustainability, a number of actions will take place this year, which will have significant impact on the way Europe deals with the topic. While it was announced at the COP26 climate conference, that the body that develops international accounting standards (IFRS Foundation), would create a new board for sustainability disclosure requirements (ISSB), the EU has been working on its own legislative initiatives to increase sustainability related reporting for years. Currently, the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Corporate Governance proposal are making their way through the legislative stages in the EU. Simultaneously, negotiations on carbon taxes will be an important point of discussion this year too, with the Carbon Border Adjustment Mechanism (CBAM) regulation proposal, which is part of the ‘Fit for 55’ reform package, also making the legislative rounds. All of these pieces of legislation would see companies required to report on an increased level about the impact their activities are having on the environment and in all likelihood see them forced to pay increased taxes per ton of CO2 emitted.
Meanwhile, the European Central Bank (ECB) has recently concluded a broad climate stress test, in which 4 million companies and 1,600 banks were tested on their ability to deal with climate-change related simulations. The results of these tests could lead to increased Pillar 2 capital charges for individual banks, but that is yet to be seen. It should be noted that European companies are mobilizing heavy lobbying efforts in an attempt to try to limit the ambition of these proposals, but the extent to which they will be successful is still unclear.
On the digitalisation side, there is also a number of legislative proposals currently being discussed, which could see significant changes for companies. As part of an extensive legislative package put forward by the EU, regulations on platforms, artificial intelligence and cybersecurity are all in the mix. Starting with platforms, the Digital Services Act package is under way, which comprises the Digital Services Act and the Digital Markets Act. The former sets rules for how online intermediaries and platforms must act, so setting rules for what kind of information companies like Meta can share as well as how online marketplaces must behave, to name a few. The Markets Act, sets rules for how gatekeeper platforms must behave, making sure that your Google search is not biased toward showing you certain results or Meta not allowing certain vendors to be present on their platform. Put together, these acts can come to have a significant impact on the way companies do business online in coming years, and will inevitably also have impacts on consumer choice, safety, online behavior etc.
Another significant file to follow is the EU’s Artificial Intelligence (AI) package, which includes a proposal for a regulation on AI as well as plans for bringing Europe to the forefront of AI use and development. While there has been some criticism of the European Commission for not being ambitious enough in its risk assessment of the potential harmful effects of AI, this proposal will still go at least some way to ensure that AI development is more regulated as its speed of development and use increases, with a further strengthening of the rules very likely to be seen in coming years.
And finally, we would be remiss to not mention the cyber security strategy being developed by the EU, which comes at a time when the risks of cyber crime and warfare are increasing daily. Yet many European countries have not focused much on this topic until now and it has left Europe’s defenses dangerously shaky, which could have severe impacts on our companies and societies. It is for this reason, that the EU is focusing on developing this capability through a lot of the structural funding being released to Member States these days, as well as asking both governments and businesses to take this threat seriously.
In any case, it will be a busy year for the Commission, which is eyeing the end of its current mandate coming to a close in the spring of 2024. This means that if they want to see initiatives through to the end, taking account of the usual 2-3 years’ timeline for proposals to go through the system, they have little time to lose in order to show results on all these files. And as always, NFU will do its best to stay on top of each new development.
Policy Officer NFU