Last week, the European Commission presented the long-awaited “Omnibus” package, which is being promoted as a measure to ease corporate administrative burden. However, for many experts, the proposal represents a major deregulation, particularly in relation to corporate due diligence obligations. Some concerns are that the so-called simplification package will actually lead to legal uncertainty, reduced protection for affected people and the environment, and negative consequences even for businesses and investors who were expecting clearer and more harmonized regulations and level playing field.
With reference to protection of human rights and the environment, the biggest concerns relate to the significant weakening of due diligence obligations to cover only direct suppliers (Tier 1), the removal of key safeguards in the civil liability regime, the dilution of requirements for stakeholder engagement – a crucial element for an effective due diligence process, and the elimination of climate transitions plans.
At the core of the Corporate Sustainability Due Diligence Directive (CSDDD) are international standards – the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Responsible Business Conduct, which clearly state that due diligence is a continuous process, should cover the entire value chain, and must be based on effective engagement with stakeholders.
What Are the Main Changes Affecting CSDDD?
1. Weakening of Due Diligence Obligations
CSDDD in its current form: The directive requires companies to conduct risk-based due diligence throughout the entire value chain, including indirect business partners. This covers subcontractors further down the supply chain, where human rights and environmental risks are most severe. Companies are required to assess the effectiveness of their policies annually and adapt them if necessary. Termination of business relationships is a required measure if violations are identified and cannot be prevented or mitigated.
CSDDD under the “Omnibus” Package: Significantly limits these obligations by restricting due diligence to direct business partners only and removing the obligation to terminate relationships in cases of identified violations. Effectiveness assessments will now be conducted once every five years, which dramatically reduces the ability to react in a timely manner. In practice, this will weaken the prevention of serious incidents, similar to the collapse of Rana Plaza in 2013, where workers exploited by subcontractors deep in the supply chain lost their lives.
2. Access to Justice: A Step Back from Corporate Accountability
CSDDD in its current form: Guarantees access to justice for victims of corporate abuse, including environmental harm and exploitation. Its civil liability provision enables victims to seek compensation from companies that failed to meet their due diligence obligations, resulting in harm. This principle is grounded in international law, which establishes that any breach of duty entails an obligation to provide redress. However, with its removal, the existing fragmented system persists, leaving accountability dependent on the national legal frameworks of individual countries.
CSDDD under the “Omnibus” Package: Eliminates the obligation for member states to provide a civil liability mechanism, restricts the possibility for collective claims, and shortens time limits for legal actions. This will make it significantly harder for victims to seek justice and hold companies accountable for violations. Additionally, the removal of penalties reduces corporate responsibility and risks turning the directive into a purely formal procedurewith no real impact.
3. Climate Commitments: Formal Plans Without Real Action
CSDDD in its current form: Companies are not only required to adopt climate transition plans but also to implement them. These plans are subject to monitoring, and non-compliance with set targets results in penalties. The goal is for businesses to actively reduce their carbon footprint.
The CSDDD under the “Omnibus” Package removes the obligation for companies to implement climate plans, reducing them to mere symbolic documents with no practical impact. This shift promotes “greenwashing,” enabling businesses to maintain their status quo without making meaningful climate efforts. Consequently, the most vulnerable communities, including indigenous peoples and workers in highly affected industries, will bear the cost of climate change impacts, despite having contributed the least to the crisis.
Now, everything is in the hands of the European Parliament and the Council of the EU, which will decide whether to confirm these measures or review them. The key question is whether it will be recognized that these changes do not add value to the due diligence process, but instead focus solely on reducing corporate costs. In this context, even economists and investors may question whether regulatory delays and uncertainty will lead to higher long-term costs and risks for businesses.For sure there is significant impact on people and environment where protection of rights and communities is no longer a priority.
