At the end February, we exposed how the European Commission’s recently announced Omnibus proposals intend to modify corporate sustainability due diligence, reporting and taxonomy and how it will influence the effectiveness of these key legal frameworks.
Frank Bold’s Julia Otten presented our views at a webinar co-organised with ShareAction, WWF European Policy Office, the European Coalition for Corporate Justice and the World Benchmarking Alliance.
The proposals that were leaked just days before the Omnibus package was presented sparked major concerns that the European Commission is not just simplifying legislation but in fact plans to deregulate altogether, backpedaling on its commitments to the European Green Deal.
Find below a summary of the key points discussed in the webinar on the three laws targeted in this first Omnibus proposal (as more are expected) or you can watch the whole webinar recording.
With Richard Gardiner, WBA
By discouraging companies from checking their suppliers beyond Tier 1, the Omnibus proposal breaks with the risk-based approach established by international standards.
Richard emphasised that forbidding companies from asking their suppliers for information outside of CSDDD scope disincentives companies to go beyond what’s in the text. This is a great step back from the original CSDDD which encouraged companies to focus their attention on the most severe impacts in their value chains, such as child labour or forced labour.
Allowing companies to only suspend contracts with high-risks suppliers and review their due diligence process every 5 years will enable them to continue engaging in risky business ties with little accountability.
This means companies have no obligation to review whether the due diligence they have in place is actually effective. Ongoing or periodic review is recommended in international standards and guidance. Moreover, the obligation on companies to terminate contracts with high risk suppliers has been replaced with merely suspending business relations with them - a change in policy that effectively takes away the last resort to prevent complicity in human rights and environmental abuses, allowing companies to keep engaging with risky supply chains with little consequence.
Narrowing the engagement with smaller suppliers puts workers and the environment at greater risk of violation without redress.
The CSDDD’s ‘chain of activities’ definition went sufficiently down the value chain to help companies improve their due diligence performance. However, the Commission now proposed that companies should severely limit their risk checks on small and mid-sized suppliers that have less than 500 employees, thereby leading to a greater risk of human rights and environment violations in supply chains without effective redress of justice.
With Marion Lupin, ECCJ
The deletion of EU-wide civil liability provision is a clear step back from harmonisation and combating the fragmentation of the EU market.
Marion pointed out that the consequence of removing this EU-wide clause means companies might need to make 27 different assessments for 27 different Member States based on their varying national laws. This will therefore complicate the picture rather than simplifying it. For victims, this means there is a sole reliance on national legislation which in practice recurrently fails to hold companies accountable. As Marion underlined, national legislation is not meant to deal with extraterritorial affairs, making it very difficult for national judges to prosecute international subcontracting relationships.
The cancellation of the obligation to provide representation mechanisms will make it harder for victims to be represented by NGOs and trade unions.
The cancellation of this obligation is a major barrier to the effective redress of justice for victims of human rights and environmental abuses who may not have the resources to adequately represent themselves in court. Once again, this reversal of policy goes against the foundational aims of the CSDDD to ensure that offending companies are brought to justice.
Changes to administrative liability in the CSRD now give Member States a lot of discretion in setting maximum limits for penalties, which will lead to a race to the bottom and further fragment the EU market.
Member States will be incentivised to set as low rates as possible in order to be attractive to businesses that operate in their jurisdictions, which will very likely lead to risks of dumping and a race to the bottom. In addition, this move represents a step away from harmonisation in the EU market as each Member State may take a divergent approach.
With Julia Otten, Frank Bold
The so-called ‘Stop the clock’ proposal is misleading for companies on what is applicable to them and how to prepare.
The European Commission presented a separate measure to fast-track the approval of a delay of 2 years for companies that were set to report in 2026 and 2027 according to the CSRD. Julia advised businesses to continue using the ESRS framework and focusing on double materiality and gap analysis so they aren’t surprised by any political outcome that may materialise, while benefiting from the opportunities that standardised ESG reporting can bring to them
It is crucial to discuss what midcaps actually need, and provide them with proportionate standards.
Julia raised the concern that a complete removal of midcaps from the legislation will mean that the reliability and availability of sustainability data will be drastically reduced. It would also complicate things for large companies who would not have easy access to information they need. She also underlined that the voluntary standard (VSME) is not fit for purpose when applied to larger companies.
The omission of sector-specific guidance means that the European Commission has given away its own power to international standard setters
Julia accentuated the fact that sector-specific guidance provides support for companies and helps them filter and prioritise the most important sustainability issues that are relevant and prevalent in their industry. Halting this work completely misses the opportunity to provide much needed clarity and guidance to companies.
With Mariana Ferreira, WWF Europe
The 10% materiality threshold threatens the objectives of the EU Taxonomy, reducing it a tick box exercise and decreasing the amount of meaningful information that will be published.
Mariana underscored that the application of a 10% materiality threshold for the EU Taxonomy is significantly disproportionate in light of 80% of companies being removed from its scope. Given the overall revenue of very large companies, 10% represents both a huge sum and a vast amount of data which we will no longer be able to access, resulting in less comparability of data that will impair the Taxonomy’s ability to support the EU’s green transition.
The combination of the reduction in scope of the EU Taxonomy and the materiality threshold threatens the Green Bond initiative that depends on this data.
Mariana emphasised that these two measures combined represent a significant butchering of the EU framework will cause a lasting blow to the Green Deal.
The Omnibus proposal is being framed as a simplification for companies, but as Marion Lupin pointed out, it does the opposite, forcing businesses to navigate 27 different legal systems with varying liability rules. Weakening key accountability measures at the top does not eliminate obligations for SMEs at the bottom; rather, it creates more complexity and legal uncertainty.
Mariana Ferreira criticised the Omnibus proposal as a purely political move rather than a rational revision. The European Commission has dismantled in just three months what took a decade to build, undermining investor confidence and creating unnecessary instability. To move forward, the debate must return to the fundamental reasons for which this legislation was developed in the first place. Meanwhile, Julia Otten concluded with the global implications of these changes, warning that the EU must consider how other major economies, including the U.S., China, and Russia, will interpret this shift. Without a strong, evidence-based foundation, the EU risks triggering a race to the bottom in global value chains.
We urge EU Member States and the European Parliament to correct the course of this proposal and maintain Europe’s commitment to robust sustainability reporting and due diligence frameworks, ensuring European businesses remain resilient and competitive.
With the latest leaks, it is becoming clearer and clearer that President Ursula von der Leyen and Commissioner Valdis Dombrovskis are willing to sacrifice the very foundations of the EU’s ESG legislation all whilst bypassing the due legislative process.
The expert group Frank Bold, along with Greenpeace and Friends of the Earth, has submitted a complaint to the European Commission regarding the actions of Czech authorities in setting emission limits for the Počerady coal power plant. In August 2024, a court revoked the plant's extensive emission limits derogation, and authorities were required to immediately reflect this decision in its operating permit. However, this has not yet happened. As a result, the power plant is currently violating the legal limit for mercury emissions. The complainants are calling on the Commission to investigate whether the Czech Republic’s approach to Počerady is in breach of the EU Industrial Emissions Directive (IED).
Domestic political opportunism and foreign anti-competitive pressure threaten to dismantle one of its biggest advantages. Read below a brief summary of our conference on sustainability and competitiveness held last January 2025 in Brussels.
