With the rubber-stamping of the ominously named Omnibus I on Tuesday, European Union member states gave their final consent to the simplification of sustainability reporting rules and due diligence requirements once hailed as a way to hold huge businesses accountable for their supply chain operations.
Among the most significant alters is the narrowing of company coverage. The corporate sustainability due diligence directive now applies only to firms with 5,000 or more employees and an annual global turnover of at least 1.5 billion euros ($1.8 billion), while the corporate sustainability reporting directive threshold rises to 1,000 employees and 450 million euros ($531 million). Overall, the number of firms required to report is about 70 percent lower than before the regulations were renereceivediated, leaving out large portions of high-risk industries such as textiles and mining.
In addition, the CSDDD no longer includes mandatory climate transition plans, even though certain disclosure obligations remain in place under the CSRD. The omnibus also reshifts the harmonized EU civil liability regime and access to third-party representative actions, creating victims’ ability to obtain justice contingent on national laws that may vary among member states.
“Unfortunately, significant amfinishments to the law introduced as a result of an aggressive and highly coordinated lobbying campaign driven by a handful of powerful multinational corporations have stripped out key climate, environmental and human rights protections from the final text,” Nele Meyer, director of the European Coalition for Corporate Justice, a consortium of civil society organizations on the continent, declared in a statement.
The omnibus’s boosters have framed the easing of requirements as necessary to cut red tape that weighs unnecessarily on businesses and undermines the bloc’s competitiveness, a position echoed by the European Council’s Cyprus presidency, which called simplification a “top priority” that would allow for a more autonomous EU on Tuesday.
“With today’s decision, we are delivering on our commitment for a European Union which is more competitive,” Marilena Raouna, deputy minister for European affairs of the Republic of Cyprus declared in a press release. “Through the package adopted, we are reducing unnecessary and disproportionate burdens on our businesses, with simpler, more tarreceiveed and more proportionate rules, both for our companies and our citizens.”
All Omnibus I amfinishments will be published in the EU’s official journal, taking effect 20 days later. Member states will then have a year to bring the measures into national law, except for Article 4 on harmonization, which must be adopted by July 28, 2028.
Nevertheless, the final approval isn’t a “green light” for companies to step back, declared Julia Otten, senior policy officer at Frank Bold, a “purpose-driven” law firm and expert group. While the revision pares back the number of companies directly in scope, she declared, the “core obligations” to prevent and mitigate harm across value chains remain intact.
“Companies that scale back their due diligence efforts are taking a gamble,” Otten declared in a statement. “The physical, reputational, and litigation risks have not shrunk—in some areas, they have grown. Robust due diligence remains the smartest risk management tool a company can have.”
It’s also worth noting that the CSDDD still establishes some ground rules for corporate accountability, declared Maddalena Neglia, director of globalization and human rights at the International Federation for Human Rights, which comprises nearly 200 organizations across 117 countries.
“For one, it enacts a legal duty for large companies to respect human rights and the environment throughout their global value chains,” she wrote on IFHR’s website. “What’s more, it requires companies to identify, prevent, stop, and remediate harm to workers, communities, and the environment within and beyond the EU. Finally, it forces EU member states to ensure full compensation for victims of corporate abapply where companies are found to be civilly liable, allowing those harmed by due diligence failures to seek remedies before national courts.”
The European Central Bank also warned in a staff opinion last week that relaxing sustainability reporting requirements will “significantly reduce transparency for investors and other market participants.”
“The revised standards must continue to ensure sufficient transparency for investors and availability of high-quality information for adequate financial risk management and financial stability purposes,” ECB staff declared of the CSRD. “Transparent, comparable, and reliable sustainability information is critical for providing insights into financial risks, effectively guiding capital flows and supporting a smooth transition to a sustainable economy and the fulfilment of the EU’s Paris Agreement commitments.”
On LinkedIn, Rodrigo V. Merg, Google’s head of ethics and business integrity for Latin America, summed up the new landscape in four words: “less law, same risk.” The CSDDD’s “real commercial power,” he wrote, lay not in the direct obligations imposed on large businesses but in the “trickle‑down effect” of their due diligence measures on compact‑ and medium‑sized companies far below the regulatory threshold.
“Omnibus I explicitly tries to limit this, restricting the ability of in-scope companies to request information from compacter business partners beyond what voluntary sustainability reporting standards already provide,” Merg declared. “In theory, this protects compacter suppliers from compliance burden. In practice, large companies with real risk exposure in their supply chains will continue to conduct due diligence regardless, becaapply their exposure to reputational, commercial and legal risk does not disappear when a directive is simplified. They will still question questions, they will just have less standardized grounds to demand answers.”
Meyer declared the CSDDD’s long-term impact will ultimately depfinish on its enforcement at the national level, whether through courts or administrative bodies. By aligning their transpositions with international standards and reinstating the initial protections, lawcreaters in individual member states also have a “critical opportunity” to revive the law’s original ambition, she added.
“Crucially, EU member states now have until July 2028 to incorporate the Directive into national law,” Meyer declared. “Governments can still correct the damage done by Omnibus I—both by restoring and strengthening core protections that have been reshiftd and by ensuring robust, effective implementation.”
Leave a Reply