Background
On 26 February 2025, the European Commission published the proposal for the Omnibus Simplification Package, which aims to simplify EU rules, reduce red tape, and unlock additional investment capacity.
Among the changes proposed is the amendment to Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 (also known as the Corporate Sustainability Due Diligence Directive or “CSDDD”), focusing on balancing sustainability objectives with competitiveness and reducing compliance burdens while maintaining effective corporate responsibility mechanisms.
The Corporate Sustainability Due Diligence Directive
The CSDDD entered into force on 25 July 2024 to ensure that companies operating in the EU market take responsibility for identifying and mitigating adverse human rights and environmental impacts in their operations and supply chains. The directive introduced mandatory due diligence obligations, requiring companies to implement governance mechanisms, risk assessments, and remediation measures.
The key due diligence obligations for companies involve identifying adverse human rights and environmental impacts within their own operations and those of their subsidiaries and business partners throughout the activity chain.
Business and industry associations expressed some concerns about the CSDDD due to its complexity, implied costs, and legal uncertainties.
See also our previous newsletter.
Changes introduced in the Proposal and impacts on companies
The core revisions to the CSDDD proposed by the Commission in the Omnibus package aim to ease the regulatory burden, clarify legal obligations, and align due diligence responsibilities with practical business considerations.
- The proposal limits the scope of the due diligence obligations to lift the communication burden on small and medium businesses (SMEs). It limits the amount of information that large companies may request as part of the value chain mapping, specifying that large companies should limit information requests unless they need additional information and cannot obtain that information in any other reasonable way (Recital 22 and Article 4, par. 3).
- It simplifies the assessment obligations. The amendment states that due diligence requirements should, as a general rule, be limited to a company’s operations, subsidiaries, and direct business partners. This means that companies will only be required to conduct in-depth assessments of direct business partners unless they obtain plausible information suggesting an adverse impact at the level of an indirect business partner (Article 4, par. 4).
- It also limits the frequency of periodic monitoring, extending the intervals in which companies need to regularly assess the adequacy and effectiveness of due diligence measures from one year to five years (Article 4, par. 8).
- Another essential change is the proposal’s streamlined definition of stakeholders and limitation of due diligence steps to ensure engagement is focused only on relevant stakeholders. These are specifically identified as workers, individuals, and communities whose rights or interests are or could be directly affected by the company’s products, services and operations, subsidiaries and business partners (Article 4, par. 2).
- Measures are developed to reduce legal uncertainty and address business concerns about excessive litigation risks. Notably, the proposal tasks the EU Commission with developing fining guidelines in collaboration with the Member States and prohibits Member States from setting a fines cap that would limit the flexibility of supervisory authorities for the imposition of penalties (Article 4, par. 11). Furthermore, the proposal removes the EU-wide civil liability regime in the CSDDD. Instead, it relies on existing national liability laws, ensuring companies remain accountable under domestic frameworks. It also eliminates provisions on representative actions and overrides mandatory application while maintaining victims’ right to full compensation if a company’s due diligence failure causes harm (Article 4, par. 12).
Finally, the proposal grants companies additional time to prepare for compliance with the new requirements by delaying the application of CSDDD obligations for large companies by one year—until 26 July 2028. At the same time, it advances the deadline for the EU Commission to adopt guidelines by one year—to July 2026.
The proposal will have significant practical and financial implications for businesses, as it will foreseeably lower compliance costs, as companies will no longer need to conduct annual full-scale due diligence or maintain extensive engagement with indirect suppliers and improve flexibility in Supply Chain Management.
Critics
Although the European Commission has presented the proposal as a successful way to balance sustainability with business flexibility, some have voiced concerns. Climate advocates and policymakers argue that, instead of enhancing clarity, the proposal could undermine fundamental aspects of these key pillars of the Green Deal and responsible business practices.
Share on
