An EU sustainability regulation, part of the Green Deal, risks making entrepreneurship almost impossible in the European Union.
By aiming to “harmonize” at the EU level the criteria for which economic activity “qualifies as environmentally sustainable”, the regulation in question will make doing business in the EU unnecessarily difficult. Complying with environmental legislation in the European Union, besides being controversial, is already very complicated. This rule is likely to dissuade entrepreneurs and investors from setting up shop in the EU.
Ambiguity and complexity around environmental credentials can be scary for an entrepreneur. When confronted with hundreds of pages of often vague environmental legislation that threaten to strike their business venture down for not being green enough, playing it safe and working for someone else can seem more attractive. That means we all lose out on the benefits of bold, brave entrepreneurs forging new paths, pioneering new technologies, and fuelling economic growth, all in the name of often overdone or ill-considered rules that do little (or nothing) to save the planet.
Agreed by the European Parliament and Council as part of the General Union Environment Action Programme to 2030, the regulation states “financial market participants need to explain to investors about how the activities in which they invest contribute to environmental objectives.”
Entrepreneurship leads humanity to solve all kinds of issues. It should not necessarily be constrained to focus on one area, the environment, as laudable as that is. Investors also stand to take a hit. If someone has built up their wealth over time, the state should not decide how that person can invest their money. People may be losing the opportunity to grow their income because they cannot demonstrate they are creating or supporting “green entrepreneurship”.
The European Union is well-known for its high standards of legislation. Recently, at a panel discussion at the Prague European Summit 2023, I asked a question about this issue and Marie Donnay, Director of the Recovery and Resilience Task Force of the European Commission, replied that she hoped other countries would follow the EU’s example by committing to substantial new regulation to, as the regulation puts it, “reorient capital flows towards sustainable investment.”
Instead of over-legislating environmental issues, the EU should remember what they said in 2017. They said they would be focusing on strengthening innovation in Europe’s regions: creating strategies for resilient, inclusive and sustainable growth, boosting innovation capacity in less-developed and industrial transition regions; increasing cooperation in innovation investment across regions; reforming regional innovation systems; facilitating synergies between EU policies and instruments.
Making economic growth sustainable can be achieved without overregulating and micromanaging from Brussels every active company in Europe. Instead of barriers to entrepreneurship, Europe needs new ideas, innovation, economic growth, and entrepreneurial spirit to both tackle climate change and improve all our lives. With a different approach, EU regulation could help rather than hinder these goals.
Written by Luis Pedro Santis Fuentes is a writer on politics, policy, economics, and philosophy based in Prague, Czechia. He is a former lecturer, a fellow with Young Voices Europe, and the co-founder of Q-English Academy.
