OpenLobby.EU
Explore

Stichting Onderzoek Multinationale Ondernemingen

SOMO

Providing information on companies and the sectors in which they operate, corporate social responsibility, trade and investment agreements, to civil society organisations in world wide and especially developing countries in order to increase understanding and provide ways to achieve sustainable societies including the respect of human rights.

Lobbying Activity

Response to Taxonomy Delegated Acts – amendments to make reporting simpler and more cost-effective for companies

26 Mar 2025

By seriously reducing the ambition of reporting according to the taxonomy, the EU is losing its global leadership and standard setting role for developing taxonomies in many countries all over the world. Many countries and regions (e.g. ASEAN) have been taking the EU taxonomy as the core standard and adapted them to their context and (climatic) circumstances. Some countries have even developed or are developing more sectors and have understood that more developed social criteria are important for a sustainable and balanced taxonomy (e.g. Indonesia; for more information: see Version 2 Module 4: Sustainable Finance Taxonomy Guidebook (FFA, 2024). In this way, the EU taxonomy had facilitated the interoperability and credibility of taxonomies to orient credit, investment and corporate activities towards activities that reduce climate risks for companies themselves, the financial industry and people around the world. The current proposals by the European Commission to reduce the reporting undermine the core, minimalistic, strategy of the EU to finance the goals of the Green Deal and the Paris agreement: The EU imposes no to little obligation to actually apply the taxonomy, the EU did not develop a taxonomy of harmful activities (i.e. (potential) stranded assets) which are prohibited from being financed, but the EU only provided a legal standard for identifying and reporting on economic activities that are -mostly but not all- aligned with the Green Deal and Paris Agreement in order to guide corporate and financing decision-making. In order to avoid greenwashing, a core objective of the taxonomy, the following EC proposals for amending the Delegated Regulation (EU) 2021/2178) have to be reversed as follows: a) The threshold for assessing and reporting on various Taxonomy-eligible and Taxonomy-aligned KPIs by various financial undertakings (asset managers, credit institutions, investment firms, and non-life insurance or reinsurance undertakings), have to be based on the cumulative value above 2% of financial assets and other denominators. In others words, obligations should not start from 10% of cumulative value onwards as the EC proposes, as this would keep many large financial undertakings non-transparent, including any (non) progress over the years, also taking into account that many sectors are even not covered by the EU taxonomy. b) The threshold for assessing compliance on both capital and operational activities by non-financial undertaking have equally to start at 2%, not 10%, to ensure any (non)progress on greening of activities can be traced by the financiers. If the EC keeps the 10%, financiers will ask each non-financial undertaking more information based on own-designed standards, which will actually increase the reporting burden of non-financial undertakings. Regarding the simplification of per activity information", the EC should NOT suppress; 1) the separate reporting on DNSH and minimum safeguards: The minimum social safeguards are important indicators whether Taxonomy aligned activities are fully applying Art. 18 of the Taxonomy, which prevents Taxonomy aligned activities from unintended social consequences which can reduce the value, sustainability or trust of the taxonomy aligned activity. The minimum social safeguards should ensure the adherence of social laws and norms, without which Taxonomy aligned activities could be cancelled by court rulings.. 2) the explicit reporting on the percentage of non-aligned activities: it should provide a clear easily visible indicator about the lack of alignment with the Taxonomy, and ideally relate to all the non-aligned activities (not only from 10% of cumulative value of CaPEX and OpEX). The EC should propose to expand the coverage of sectors by the Taxonomy, as various countries around the world are doing, to ensure the EU can effectively decarbonise and build a resilient economy in a transparent way: see the Platform for Sustainable Finance reports tabled in 2022:
Read full response

Response to Savings and Investments Union

7 Mar 2025

The SIU policy to encourage citizens to hold more of their savings in capital-market instruments is based on the wrong assumption that through more investment in shares, simple investment funds or other financial market instruments because: 1. Capital outflows: There is no guarantee that companies will be able to have more long-term capital to operate: The EC documents do not take into account the increasing pay-outs by EU based companies in dividends and share buybacks: Since the Paris agreement, the largest EU companies alone paid out $ 2,035 billion to shareholders (2016- 2023). They do so to compete against the largest US companies that pay out even more ($ 9,478 bn). Fossil fuel-based companies are paying out 75% of their profits to shareholders, while reducing their climate ambitions, reducing their R&D, keeping energy prices high resulting in inflation. The EU-based banks paid out 123 bn to shareholders in 2024 rather than passing the high interest rates to their saving clients or ensuring more risk-capital for transition plans of their clients. The SIU policies to support a sustainable EC industrial policy should propose laws that prohibit payouts to shareholders when the company has high debts, low R&D expenses, insufficient financing of its transition plans, does not pay of re-skilling its workers towards climate-friendly operations, and does not (sufficiently) adjust wages to inflation. 2. Financial extraction: The reason why citizens receive more value from investing rather than from savings, is the huge extraction from companies for ever higher profits to be distributed to shareholders at the expense of long term investments in the company, other stakeholders, and the planet. This often harms citizens in other ways (jobs and upskilling, climate friendly products, etc). Moreover, the large amount of speculative players including using AI, cause share price instability or low share prices when retail investors need cash. 3. The SIU arguments to finance more (large) SMEs through investments from issuing shares, or to provide exits for private equity, ignore what the impact is on management and long term strategies when shareholders are influencing listed or large SME companies through engaging or voting, and pressure from the stock markets to keep share values high with short term strategies. 4. Anti ESG votes: The SIU proposals do not really address the dominance of US asset managers as shareholders in many EU-based (financial services) companies, because their scale offers lower fees. This results in EU profits to flow to US investors. US Asset managers increasing have voted against pro-ESG resolutions and US financial authorities thwart engagement on ESG issues in recent regulations. This will also undermine the willingness for swift decarbonisation by EU companies with US shareholders. According to research, the direct financing of companies through banks has the best result in making companies operating an energy transition. 5. Choice reduced: The trend, incl.by EU companies, to increase share buybacks reduces the amount of shares on the stock market to be bought by investors and investment funds. This reduces choice and increases concentration of investments, with risks of a bubble. There are less and less IPOs and newly issued shares are only bought by active investment funds, while the passive ETFs are more popular and increasing. The EC policy should ban share buybacks or at least ensure that they are not for share price manipulation (stricter Art. 5 of Market Abuse Directive). 6. Venture capital (VC): The EC argues that VC should invest in more risky investments. However, VCs capital is based on very high returns/capital outflows of investees, and often are based in tax havens. The upcoming Startup and Scaleup Strategy should require (financial) companies to retain the sharebuybacks in a fund to finance start-ups. 7. De-risking needs to be subject to strict conditions on labour and climate laws
Read full response

Response to Environmental, social and governance (ESG) ratings and sustainability risks in credit ratings

1 Sept 2023

Regulating the ESG industry is overdue given its increasing use clear evidence of grave and fundamental problems, and the serious abuse and confusion about what ESG ratings mean. The proposed Regulation will only tackle part of the problems by requiring more and better transparency, general quality requirements, measures to deal with conflicts of interest and inadequate corporate governance, as well as authorisation, supervision, and sanctioning by ESMA. Still, these legal requirements still need improvements to be effective (see below). The Regulation will not achieve its objective of enhancing the integrity and quality of the ESG ratings so as to prevent greenwashing or other types of misinformation, including social-washing (Art. 1). By defining an ESG rating as assessing a rated entitys ESG characteristics or exposure to ESG risks or the impact on society and the environment, the Regulation will continue to allow confusion, misinformation to policy makers and retail investors, and abusive use in reporting and marketing. The definition does not sufficiently reflect that most currently used ESG ratings assess the risks from some ESG factors on a rated entity. Moreover, such risks assessments might be based on (limited) backward-looking data and only assessing such risks compared to rated entities in the same (harmful) sector (relative risk ratings) which hardly if at all indicate what the impact from the rated entity is on ESG factors/society and the environment is. By introducing a non-interference clause (Art. 26), the new Regulation refrains from directly intervening to improve the quality ESG ratings by introducing minimum quality requirements about impact assessments and minimum ESG criteria/KPIs for each of the E, S and G factors in a balanced way (with reference to related to existing EU regulations). Also, there is no strict obligation about the data to be used, e.g. beyond that from the rated company by including info from various stakeholders. This omission potentially creates a financial bubble. The Regulation also misses an opportunity to achieve the needed improvements in transparency about ESG ratings, amongst others by: limiting important transparency requirements to be only disclosed to clients and rated entities (Annex III.2.) or supervisors (Annex I, e.g. ownership structure) rather than to the public (Annex III.1); by not requiring information about the time horizon used, how conflicting information has been dealt with, and disclosure whether and how the used information has been actually verified on the spot. All ESG ratings should have a disclaimer that the ESG rating is based on non-verified information. The Regulation will need to strengthen particular measures to be effective in its objective to prevent conflicts of interest. The proposed rules (Art. 23) underestimate for instance the influence of credit rating agencies that also provide ESG ratings for the same clients, and co-shareholding of ESG rating companies conglomerates and the rated companies: academic research exposes weakening ESG ratings. The requirement (Art. 15.1) for ESG rating providers not to offer particular (ESG) consultancies and other activities will be helpful but difficult to supervise and sanction given the current sprawling and intertwined ESG services operated around the world by global conglomerates that dominate the ESG rating industry. The proposed rules for authorisation/equivalence approval/recognition of ESG rating providers offering ESG ratings in the EU are too complex and might still allow for loopholes. ESMA should have sufficient financial and human resources to implement its expanded mandate. In addition, the Regulation should clarify in Art. 2.2. that NGOs that not offer paid services to investors and publish their ratings and related methodologies to the general public, are not covered by the Regulation.
Read full response

Response to Revision of the Union Customs Code

14 Sept 2022

The Centre for Research on Multinational Corporations (SOMO) welcomes the Commission’s planned reform of the Union Customs Code (UCC) and this call for evidence for an impact assessment thereof. Find our submission attached.
Read full response

Response to Effectively banning products produced, extracted or harvested with forced labour

20 Jun 2022

SOMO welcomes the Commission’s initiative for effectively banning products produced, extracted or harvested with forced labour and this call for evidence. Find our feedback and position in the document attached.
Read full response

Response to Environmental, social and governance (ESG) ratings and sustainability risks in credit ratings

6 Jun 2022

As an expert research institution with more than 30 years of experience investigating the impacts of multinational companies, The Centre for Research on Multinational Corporations (SOMO) considers that there is, within the European Commission’s proposals, a fundamental misunderstanding about how ESG rating can contribute the objectives of the European Green Deal. The European Commission’s (EC) definition of ESG ratings (contained in its consultation document) is extremely broad. It includes ratings products that provide “an opinion regarding an entity, a financial instrument or a product” and opinions on a company’s “exposure to ESG, climatic or environmental risks”, or the “impact on society and the environment”. This definition encompasses widely different ways to assess ESG risks and impacts while all being called ESG ratings, and often used interchangeably by end-users. Specifically, it covers ESG ratings that provide information about the financial risks for the company or financial instrument from ESG factors, and ESG rating products that look at the impact of a company or investment on the environment, society and/or governance issues. The conflation of these two purposes is misleading for investors and can be misleading in terms of achieving the European Green Deal policy, and should be avoided. The majority of ESG ratings products focus on the former definition and are about the assessment of risks for companies and investors. As such they do little to clarify how investment can contribute to greening or sustainability of the economy. Currently ESG financial related risk ratings are used by information providers to assess, rate, rank and market an investment product as “sustainable”. Governments use these misleadingly rated investments in public figures to make claims about the amount of capital allocated to climate mitigation, green or sustainability objectives. Given that what is measured is frequently not the amount of capital allocated to climate mitigation, green or sustainability objectives, but the amount allocated to investments that will not suffer financially from ESG factors (such as climate or environmental issues), governments should not include investments that use financial risks form ESG factors in the figures for sustainable investment. In addition to the highly problematic definition and purpose of ESG ratings, there are serious methodological problems. None of the ESG ratings, even if claiming to rate ESG impacts by the company or, indirectly, the investment, are reliable. The complex methodologies involved in their calculation are hardly fully disclosed, nor are data sources. In addition, there is an over-reliance on data from the rated entities (which have a clear self-interest in the outcome), while the input of other stakeholders (people impacted by the company or investment) are seldom considered. Finally, there is no independent verification of the data or impacts on the ground. There is no use of making unreliable information more comparable. Rather, there should be legislation that requires providers pf ESG ratings and data products to publish the purpose, methodology and sources of data used to compile the ratings. Providers should also be required to provide clear warnings about the limits of the data they provide. While legislation on transparency of methodology and data used, as well as avoidance of conflict of interests, would avoid the worst abuses, ESG ratings can never be solely relied upon by investors or investor advisors/information providers. ESG financial related risks should be taken into account by credit rating agencies as an important part of any credit risk assessment – which is likely to only happen through legislation - while fully acknowledging that ESG ratings or data products are not reliable.
Read full response

Response to Commission Delegated Regulation on taxonomy-alignment of undertakings reporting non-financial information

8 Sept 2020

Based on decade long corporate research, SOMO – Centre for Research on Multinationals (Amsterdam, non-proift) would like to make the following consultation on the road map for the obligation for certain companies to publish non-financial information through the Delegated Act under Article 8 of the Taxonomy Regulation. Many criteria will be important to ensure effective and reliable corporate ‘non-financial’ reporting related to the compliance with the Taxonomy, which can guide investors as well as other stakeholders, so that the Delegated Act contributes to positive environmental and social impact. We recommend that the Delegated Act includes the following criteria and requirements: 1. Disclosure whether the corporation has provided the information based on its own internal calculations or whether consultants and external data have been used. The governance and responsibility within the corporation of producing the data about taxonomy compliant activities need to be mentioned. 2. Ensuring that information disclosed related to ‘the proportion of their capital expenditure and the proportion of their operating expenditure related to assets or processes associated with economic activities that qualify as environmentally sustainable under Articles 3 and 9” relates at least to the whole group of the corporation (and not just one subsidiary) and preferably for each of the subsidiaries of a corporate group, or an interdependent group of subsidiaries and branches (globally if the corporation is operating globally). The disclosed information must provide some detail about what kind of the corporate activities (e.g. agricultural production or processing, or which subsidiaries) are taxonomy compliant (i.e. not only a general figure). In addition, the (group of the) corporation has to report what the strategies and plans are to expand, or not, the proportion of taxonomy compliant activities within the next 5, 10 and 15 years, and how much progress has been made compared with the previous year. It would be best if the corporation could indicate in how far the activities that are non-compliant with the Taxonomy offset the (climate, environmental and social) benefits of the Taxonomy compliant activities. 3. Disclosure whether the published information regarding the use of the taxonomy has been verified by external independent reviewers, and whether the actual operation of the Taxonomy compliant activities on the ground have been verified in practice, including its positive impact e.g. in case of climate mitigation activity, or whether the verification has only been done through documentation. 4. The published information must be in useful but standardised and in a comparable format so that it can be to put in a public data base, as well as being meaningful and understandable to all stakeholders (including consumers, employees) and useful for (university) researchers. 5. The verification of the published information must be done by a public supervisory authority as is the case for financial accounting reports, and enough official resources have to be made available for verification and sanctioning the implementation of the delegated act. 6. The Delegated Act must clarify how corporations have to report on the application of each of the minimum social standards mentioned in Article 18 of the Taxonomy Regulation.
Read full response

Response to Climate change mitigation and adaptation taxonomy

27 Apr 2020

While the Taxonomy law clearly defines minimum safeguards to be complied with when applying the taxonomy (namely the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, including the International Labour Organisation’s declaration on Fundamental Rights and Principles at Work and the International Bill of Human Rights), the TEG has failed to provide clear guidance on how these minimum safeguards should be applied concretely. This is especially worrying because: - the Taxonomy law does not provide the power to issue delegated acts or other regulatory technical standards, - the financial sector already expressed difficulty to assess and integrate social risks and social factors or impacts, - the lack of clear and consistent definitions of social risks or factors in the existing sustainable finance laws (e.g. DSR, Benchmark law, IORP II), - it will become very difficult for ESG reviewers and supervisors to assess how much the uptake of this minimum safeguard has been adhered to. The impact will be that the uptake of the minimum safeguards will be problematic and diverse, undermining the social impact and the credibility of the EU taxonomy. Moreover, the positive impact of environmentally sustainable activities might not be as effective in case there will be underestimated, unforeseen and unintended negative social consequences, especially when they will become public. Strong social underpinning, which is now missing, would strengthen the uptake and application of the taxonomy for financing climate and environmentally sustainable economic activities. The TEG’s advice also risks to undermine the Taxonomy’s positive impact and uptake as a standard for financing activities tackling climate change and other environmentally sustainable objectives, for the following reasons: - the inclusion of livestock in the taxonomy, given the link with deforestation and carbon-intensive activities, and the estimated impact of livestock on greenhouse gas emissions, - allowing the use of biofuels and biogas in transport means (e.g. trucks, coaches) that can also switch to the use of fossil fuels (e.g. diesel or gas), - the criteria for forestry are not stringent enough to avoid the inclusion of forestry activities that lead to deforestation, degradation, and biodiversity loss. The credibility of the Taxonomy will be severely undermined, as well as its long term positive environmental impact, if the following categories of activities would be included in the taxonomy against the advice of the TEG who excluded them: - fossil fuels, including midstream oil and gas, - nuclear power, which could be contrary to the Taxonomy law’s objectives of pollution prevention, protection of water resources and transition to a circular economy.
Read full response

Response to Initiative to improve the Food Supply Chain

22 Aug 2017

SOMO's feedback on Inception Impact Assessment (EC Initiative to improve the Food Supply Chain) Together with other NGOs in various international NGO coalitions with representation in most EU member states SOMO, the Centre for Research on Multinational Corporations, has been addressing unfair trading practices in EU food supply chains since 2009 . SOMO’s interest in UTPs relates to mitigating their potential and actual detrimental impacts on (smallholder) producers and workers especially in developing countries. The problem of UTPs and its detrimental effects on food supply chains have the gradually been acknowledged widely and linked to increasing power imbalances. SOMO and allies have been advocating for a legislative approach with strong EU coordination to effectively counter UTPs and have made a number of recommendations to this end in 2014. SOMO therefore welcomes the EC’s serious consideration of this type of action in the form of the EU regulatory framework which it outlines in Option 3. More specifically SOMO thinks that the framework regulation should allow for an independent enforcement body that is able to receive anonymous complaints, keep information confidential and has the power and means to initiate ex officio investigations on the basis of information gathered that abusive trading practices have been applied. The body should also have the mandate to apply effective sanctions (including fines) to stop perpetrators from continuing to apply UTPs and be able to coordinate enforcement across the EU. Many EU member states have now introduced a range of regulatory measures to counter UTPs. Whereas it is unclear yet whether these measures are always effective it is clear that there is no level playing field for victims of UTPs imposed by EU actors. When member states have policies for UTPs they differ to some extent from country to country. In the Netherlands for instance, there was a voluntary system analogous to the EU level voluntary and educational system the SCI. However, the pilot, as it was called, was stopped by the government meaning that there now is no formal instance at the national level where victims can hope to seek remedy. Without strong EU coordination and equal standards and enforcement in different member states there is the risk that UTPs continue to be applied from member states with laxer policies such as the Netherlands. In this context SOMO also likes to draw attention to its recent research on joint procurement by supermarkets in different countries in the form of international supermarket buying groups. The research shows that international supermarket buying groups create conditions that facilitate UTPs being applied to their suppliers.
Read full response

Meeting with Valdis Dombrovskis (Vice-President) and

27 Oct 2016 · Sustainable Finance; CMU