The European directive that wants to save the planet

When the head of ExxonMobil says a European law could force him to leave Europe after 135 years of presence, the immediate narrative is simple: bad oil multinational versus good environmental regulation. But beneath this surface there's a far more sophisticated game at play, and a far more cynical one, worth anatomising.

The law in question is called the Corporate Sustainability Due Diligence Directive, which came into force in July 2024. On paper, it asks large companies to identify and mitigate negative impacts on human rights and the environment throughout their entire global supply chain. Sounds reasonable, almost banal. The problem emerges when you read the operational clauses: companies must monitor every link in the global production chain, adopt climate transition plans aligned with the Paris Agreement's 1.5-degree target, and if they fail they risk fines of up to 5% of global turnover.

That "global" is the key. Not 5% of European profits, not 5% of turnover generated in the European Union. Five per cent of everything you bill worldwide, calculated on operations that might never touch European territory. For a giant like ExxonMobil, with roughly $350 billion in annual turnover, that means risking a $17.5 billion fine. Not for what you do in Europe, but for what Europe decides you must do wherever you operate.

The mechanism beneath the surface

When you see a law that presents itself as a solution to a legitimate problem but creates incentives pointing elsewhere, you must ask yourself: who really benefits? Not in a conspiratorial sense, but in a structural one. Which actors gain systematic advantage from this arrangement?

First beneficiary: the consulting industry. The big audit firms would bill billions selling regulatory compliance services to companies that haven't a clue how to map a global supply chain. Second: sustainability rating agencies, who see a captive market being created for their services. Third: the Brussels bureaucracy itself, which expands power, budget and personnel every time it adds a layer of regulation.

Who pays? Multinationals through fines, end consumers through increased costs that will be passed downstream, and non-European countries that will see reduced investment. It's a classic scheme where benefits are concentrated and visible, costs diffuse and invisible. This isn't conspiracy theory, it's basic institutional economics: bureaucracies don't exist to solve problems, they exist to self-perpetuate.

The historical analogy that illuminates everything

There's an almost perfect precedent for understanding this game: the Washington Consensus of the 1980s and 1990s. Back then it was the United States and the International Monetary Fund imposing "good governance" on developing countries. Structural adjustment programmes that theoretically helped poor nations, but in practice opened their markets to Western multinationals. The rules were presented as universally beneficial, but coincidentally always favoured American interests.

Today the European Union is playing the same game, but in reverse. It can't compete with the United States and China in manufacturing, it can't compete energetically because it depends on imports, it can't compete technologically on frontier innovation. What it can do is become the global legislator, export regulatory standards as competitive advantage. It's regulatory imperialism dressed as moral concern.

European companies, already accustomed to navigating heavy regulation, gain a barrier to entry against international competitors. The Brussels machine consolidates its role as indispensable interpreter of rules that no one fully understands. And the whole thing is sold as absolute necessity to save the planet.

But the problem really does exist

And this is where the matter gets complicated, because it's not all cynicism and extortion. Child labour in supply chains exists and is documented. Environmental destruction from extractive activities is verifiable. Corporate externalities that no one pays for are real. Market failures where the system alone doesn't correct exist.

The point isn't to deny these problems. The point is that the mechanism chosen to address them is simultaneously economically inefficient, politically self-serving and practically unenforceable. Asking a multinational to monitor every third and fourth-tier supplier in countries with non-existent documentation isn't ambitious, it's theatre. It costs enormously, produces mountains of paper, and the real impact on harm reduction is marginal relative to the resources employed.

It's like mediaeval indulgences: the Church had a legitimate concern about sin and the salvation of souls, but the institutional mechanism of selling indulgences to finance St Peter's was patently self-serving. The result was a corrupt system that undermined the legitimacy of the original concern. The European directive risks the same: using legitimate environmental concerns as cover to build a regulatory empire, generating cynicism towards genuine climate action because it's mixed with obvious financial extraction.

The complexity trap

There's another level of sophistication in the game. When a rule becomes so complex that only specialised experts can interpret it, you create structural dependency. Companies can no longer independently assess whether they're compliant, they must pay external consultants. And who certifies the consultants? Further layers of bureaucracy. It's a self-feeding system.

In November 2024 the European Commission announced plans to merge this directive with two other sustainability regulations into a single regulation. They say it's to simplify. In reality they're creating a regulatory construct so stratified that no one can any longer unravel it without certified intermediaries. It's not a side effect, it's a system feature.

And when ExxonMobil protests saying the law is technically impossible to comply with, it's right on one point: asking an oil company to plan how it will reach net zero aligned with the 1.5-degree target essentially means asking it to plan its own programmed obsolescence whilst still profitably selling oil. It's designing a system where compliance is structurally incompatible with the business model.

The hidden geopolitical game

ExxonMobil's CEO said explicitly: "Europe is slowly suffocating itself. They're trying to build a so-called green economy that's not working. And instead of trying to fix that, they're now trying to drag every American company down." It's not just corporate rhetoric. It's the description of a real geopolitical strategy.

The European Union has lost its manufacturing competitive advantage. The response isn't to invest in innovation or reduce energy costs. The response is: if we can't compete economically, we'll compete morally. Transform climate concern into a tool to create regulatory moats. Force global multinationals to choose: either adopt European standards wherever you operate, or exit the European market. And hope that other countries adopt those standards, creating a system where Brussels dictates global rules without having the economic weight to do so.

What will actually happen

Looking at analogous cases in past regulations, the emerging pattern is predictable. In the short term: enormous adjustment costs, consulting boom, some companies exit the European market. In the medium term: selective and inconsistent application of rules, "compliance theatre" emerges where everyone pretends to respect rules that no one can truly verify. In the long term: standards normalise, the competitive landscape stabilises with new barriers to entry, and the only real effect is consolidation. Only mega-corporations can afford compliance, crushing smaller competitors.

And the real climate impact? Probably marginal relative to cost. Not because the concern isn't legitimate, but because the mechanism is designed for extraction and control rather than effectiveness. When you mix legitimate concerns with obvious institutional interest, you undermine the credibility of genuinely addressing real problems.

What not to do

For the European Union: don't use legitimate concerns as cover for regulatory imperialism. It undermines credibility. Don't create structures so complex that only consulting firms understand them, it invites cynicism. Don't claim moral superiority whilst Germany burns coal and France lobbies for nuclear exemptions.

For multinationals: don't completely deny the legitimacy of concerns, it's a losing strategy in the long run. Don't use compliance impossibility as an excuse for zero action, it invites political backlash. Don't assume that defensive posturing will win against transparency and real incremental improvement.

For citizens and observers: don't fall into total cynicism thinking everything's a scam, there are real problems. Don't uncritically accept that everything's being done to save the planet, there are mixed incentives. Don't think you must be either pro-climate or pro-business, it's a false dichotomy designed to block critical thinking.

The real problem

The tragedy isn't that Europe seeks to regulate multinationals. The tragedy is that when the institutions that should solve problems become the problem themselves, you undermine the possibility of genuinely addressing urgent issues. Climate change is real. Exploitation in supply chains is documented. But if the mechanism for addressing them is designed primarily to feed a bureaucratic machine and extract resources, you're not solving anything, you're just building a new level of institutional parasitism.

When ExxonMobil threatens to leave Europe, it's not defending the right to pollute freely. It's saying: this system is structured to make me responsible for the entire global fossil industry, with sanctions calculated on worldwide turnover, whilst asking me to plan my exit from the core business. It's a legal system designed to be existentially incompatible with an oil multinational's business model.

And perhaps that's exactly the objective. But if the goal is to eliminate oil companies through punitive regulation rather than through economically competitive alternatives, you're only shifting the problem. Those companies will operate elsewhere, in jurisdictions with lower standards. Europe will have its regulatory purity, but the global impact will probably be negative.

It's a perfect case of good intentions plus bad incentives plus institutional self-perpetuation producing suboptimal outcomes for everyone except the compliance industrial complex. And this, more than climate change itself, is the real problem: when those who should solve become part of the problem.