An Appeal for Stronger Standards:

Why sustainable supply chains and strong environmental and social norms will drive the future

A Blog by Sid Petersen, Managing Director of First Climate Consulting GmbH

Over the past weeks, the European Parliament and the Council reached a political compromise in Brussels that adapts key elements of the European sustainability framework. The focus was on the Supply Chain Act and the Corporate Sustainability Reporting Directive, both of which have seen their scope of application significantly reduced.

These decisions form part of a broader political agenda aimed at “cutting red tape,” affecting not only sustainability reporting but also other climate, environmental, and social regulations—including the EU Deforestation Regulation and timeline adjustments within the European Emissions Trading System. This shift is primarily driven by a single, political narrative: The promise that reducing regulation will enhance the competitiveness of European companies. But does this promise really hold up in practice?

A Decision sends Strong Signals

The EU Supply Chain Act—the Corporate Sustainability Due Diligence Directive (CSDDD)—is intended to require companies to systematically identify, prioritize, and address human rights and environmental risks across their value chains. The newly adopted version sets significantly higher thresholds than the original draft, substantially reduces the number of companies included, and weakens key enforcement mechanisms. Similar adjustments are also being made to the CSRD.

Taken together, these decisions have one overriding effect: they alter the regulatory framework of expectation. Not because sustainability has suddenly lost relevance, but because confidence in the stability and reliability of political frameworks is currently being put under pressure.

In our discussions with corporate clients, we see a growing uncertainty. Many companies have invested for years in sustainable supply chains, corporate climate strategies, and robust data and governance structures—trusting that established European requirements would be stable and long-term. In reality, there are two sides at play: on one hand, regulatory relief has been promised; on the other, uncertainty is increasing regarding which standards will actually endure. For companies with international operations and complex supply chains, this uncertainty represents a very real strategic risk.

Competitiveness Requires Reliability

In our day-to-day advisory work, one thing is clear: competitiveness is not primarily driven by the lowest possible requirements, but by reliability and predictability. Companies that got ahead of the curve and invested early in robust sustainability, risk, and governance structures are already reaping the benefits—through more resilient supply chains, reduced reputational and legal risks, and improved access to capital and markets.

Strong standards also create a level playing field. They safeguard responsible business conduct from becoming a competitive disadvantage, while short-term cost optimization is rewarded. Export-oriented companies in Europe especially depend on sustainability requirements to be binding, comparable, and predictable over the long term.

Cutting the “Red Tape”—But with Focus

Regulation and reporting must, of course, be practical. Processes should be efficient, while avoiding any duplication of structures. There is no doubt that many of the provisions originally planned in the European sustainability directives would have involved considerable implementation costs, posing significant challenges not only for small and medium-sized enterprises.

However, the answer cannot be to dilute core protection and steering mechanisms or to postpone their implementation indefinitely. Instead, this presents an opportunity: sustainability and due diligence obligations can be understood as tools to identify risks early, structure decision-making processes, and deliberately strengthen the resilience of value creation.

Companies that view these requirements not as regulatory obligations but as a strategic framework for action will be able to lay the foundation for long-term stability and competitiveness. In this sense, clear standards are not a risk—they are an opportunity for strategic development.

Sustainable Supply Chains as a Strategic Advantage

Companies that systematically analyze and develop their supply chains gain more than regulatory compliance. They gain transparency over interdependencies, can address risks at an early stage, and invest selectively in more resilient structures. This not only strengthens competitiveness but also enhances credibility with customers, investors, and employees.

In the context of the transition to a net-zero economy, this perspective is becoming increasingly important. Climate targets cannot be achieved if emissions, environmental damage, or social risks within the supply chain are ignored or outsourced. Credible climate strategies and responsible supply chains are inseparable.

The Way Forward

Europe faces the challenge of working together to continue to develop economic resilience, competitiveness, and sustainability. From our consulting perspective, the correct approach is clear: The path forward does not involve back peddling or a reduction in existing ambitions, but rather ensuring the consistent, predictable, and practical implementation of clearly defined standards. This includes intelligent simplifications in application, targeted support during implementation, and above all, reliability regarding which requirements will apply long term.

Companies that take responsibility today and anchor sustainability strategically in their processes will be better positioned in the long term. The European regulations should support this path – not with knee-jerk corrections or political acquiescing, but by providing a stable, coherent, and reliable framework.

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About the Author

Sid Petersen has many years of management experience from various leadership positions, most recently at everi GmbH, as well as nearly a decade of consulting experience in strategy development, and has been Managing Director of First Climate Consulting GmbH since 2023, where he advises companies on climate protection issues.