Investing.com -- The European Union is stepping up efforts to enhance the competitiveness of its companies, with new proposals from the French government and the EU Commission aimed at reducing regulatory burdens, boosting innovation, and addressing high energy costs.
In a note Thursday, Jefferies analysts reviewed the implications of these changes, offering insights into their potential impact on European corporates.
The French government has proposed a "far-reaching simplification" of sustainability reporting, which includes a two-year delay for the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD).
Jefferies explains that these delays, along with lighter reporting obligations under the EU Taxonomy's Green Asset Ratio, would "reduce costs going forward," particularly for listed EU companies, where CSRD compliance can cost up to EUR 1 million.
However, Jefferies also notes that it's possible that "companies who have already invested in staffing lose out."
On the innovation front, Jefferies highlights plans to close the innovation gap. This includes reforms to the EU Taxonomy aimed at supporting SMEs, as well as increased funding for SMEs to boost productivity and innovation.
Jefferies cites research from the British Investment Institute, which states that "increasing funding for SMEs boosts productivity and innovation activities."
The Competitiveness Compass proposes further actions to address energy costs. Jefferies notes that the EU is planning an Affordable Energy Action (WA:ACT) Plan, which includes mechanisms to "facilitate increased uptake of long-term Power Purchase Agreements (PPAs)" and "improved tariff methodologies" to make energy more affordable.
While the EU’s actions may help address regulatory costs and innovation, Jefferies points out that labor productivity, an important factor in competitiveness, is not as prominently addressed in the proposals, calling it a "slight omission."