EU Omnibus package and the CSDDD: Hitting the emergency brake

This recalibration comes in response to heavy criticism regarding the bureaucratic burden on companies. As a result, the Commission has prioritised efforts in line with the Draghi report, the Competitiveness Compass and the findings of its 2023 call for evidence. The changes are therefore part of a broader effort under the "Omnibus package" to reduce the regulatory burden on businesses while maintaining the core objectives of sustainability and protecting human rights.

The key proposals are as follows:

1.   Implementation timeline postponed: The transposition of the CSDDD into national laws will be postponed for one year. Member States would therefore be required to transpose the CSDDD by 26 July 2027. In addition, the first phase of application (i.e. companies with worldwide turnover of at least EUR 1.5bln and more than 5,000 employees) should be deleted. The second stage of the phased implementation will not be changed (i.e. companies with worldwide turnover of at least EUR 900,000 and more than 3,000 employees remain subject to the CSDDD as of 26 July 2028). In turn, the Commission's envisaged due diligence guidelines will be published by 26 July 2026, i.e. half a year earlier than currently foreseen. Companies would benefit from more time to incorporate the due diligence obligations into their compliance systems.

2.   Simplification of key due diligence requirements:

• The obligatory risk assessment should be simplified to generally cover only direct business partners. Indirect business partners will only be considered if there is plausible information indicating that an adverse impact has occurred or may occur at their level of the value chain.
• The definition of "stakeholders" should be reduced in scope. In particular, it will no longer encompass non-governmental organisations (NGOs). 
• The interval for the periodic assessment of the due diligence process (monitoring) should be prolonged from one year to five years, while clarifying that a company needs to assess the implementation of its due diligence measures and update them whenever there are reasonable grounds to believe that the measures are no longer adequate or effective.
• The termination of a business relationship as a last resort should be removed.

3.   Reduction of trickledown effect on SMEs: The suggested amendments further aim to reduce the "trickledown effect" on SMEs and small mid-cap businesses (i.e. companies with not more than 500 employees) by limiting the information that in-scope companies may request from their SME and small mid-cap business partners in the initial risk assessment (mapping). Specifically, the information requests should be limited to information covered by the standards for voluntary use according to the Corporate Sustainability Reporting Directive (CSRD). This limitation aims to ensure that smaller businesses are not overburdened with extensive data requests.

4.   Changes to civil liability provisions: The current civil liability provisions of the CSDDD will be deleted. Instead, the Commission aims to defer the civil liability to the respective national law of the Member States. In this respect, it is proposed to revoke the obligation for Member States regarding representative actions by trade unions or NGOs.

5.   Expansion of maximum harmonisation: The proposed amendments aim to extend the scope of maximum harmonisation to cover additional provisions of the core due diligence obligations. This should guarantee a fully uniform transposition in Member States.

6.   Clarity regarding transition plan for climate change mitigation: The proposal introduces a modification by eliminating the requirement to "put into effect" the transition plan for climate change mitigation. In line with the CSRD requirements, the proposal clarifies that the plan should include implementation actions, beyond key actions to reach the climate targets.

It is important to note that we are not there yet. The suggested amendments are proposals put forward by the Commission. They will now have to undergo the European legislative process and be submitted to the European Parliament and the Council for their consideration and adoption. With the Omnibus proposals, the Commission is sending a strong signal regarding its efforts to enhance economic competitiveness and simplify regulation. The planned amendments do help reduce the burden on companies, though the actual impact will largely depend on each company's specific risk profile and supplier structure.

One thing is clear: the Omnibus proposals have opted for a more efficient approach, but the ultimate goal remains unchanged. Therefore, the approximately 6,000 EU and 900 non-EU in-scope companies are well advised to continue preparing to implement the due diligence obligations.

authors: Johannes Frank, Stefan Holub