Frank Bold warns: reckless Omnibus proposals threaten to roll back a decade of EU sustainability progress

“With the Omnibus proposals, the EU Commission not only proposes a step backwards, but it also undermines Europe's competitive advantage in the green transition", said Filip Gregor, Head of Frank Bold’s Responsible Companies Section. “ESG data is critical in addressing the challenges EU business will be facing - from decarbonisation to digitalisation and harnessing AI to build up resilience. Blind deregulation will harm the EU economy in the long-term, and will especially punish those companies leading on the sustainability transition.” 

“The proposed changes to the Corporate Sustainability Due Diligence Directive (CSDDD) would effectively dismantle the law before it's even started to apply, without presenting any proper evidence" said Julia Otten, Senior Policy Officer at Frank Bold. "Addressing crucial issues like child labour and forced labour requires targeted oversight beyond direct business partners in the value chain. It is absurd that the Commission is proposing to limit this. The sudden shift appears to prioritise short-term industry pressures over long-term sustainability goals and the protection of human rights.”

• The Commission proposed to postpone the CSRD application by two years (for those businesses that have not implemented it) and the CSDDD by one year for the first batch of companies: This penalises the tens of thousands of companies that have already started implementing the Corporate Sustainability Reporting Directive (CSRD) and risks slowing down the rate at which companies are preparing for the CSDDD in light of the legal uncertainty arising from the legislative process. 
• The proposed changes would drastically reduce the scope of the CSRD, excluding around 80% of companies from sustainability reporting obligations without providing companies with a proportionate standard. This blank removal of all mid-cap companies is in direct contrast with the recommendation featured in the Draghi report and hinted by the Commission to create a simplified reporting framework for small mid caps, a proposal explicitly supported by governments in France, Italy and Spain.
• The Commission intends to forbid companies from asking their suppliers outside of CSRD scope for any sustainability information besides an extremely limited number of datapoints in a voluntary standard that was originally written for the very small companies. This would for instance prevent any requests on human rights or environmental impacts in value chains.
• Regarding the CSDDD, the Commission is limiting due diligence requirements to direct business partners and large companies with more than 500 employees and weakens the provisions on responsible disengagement. This risks deviating further from the international standards on due diligence, the UN Guiding Principles and the OECD Guidelines. The Commission also proposes to remove the requirement for implementing climate transition plans and completely shift the responsibility of enforcing civil liability onto Member States.

EU green finance efforts will take a major hit, because banks and investors will not have the data they need to make informed decisions. The European Banking Authority just published a few days ago a report warning against the data gaps "Granular and comparable data that will become available based on fully implemented CSRD is expected to allow significant advancements for corporate exposures in the coming years". With the moratorium on the CSRD and changes to the scope, not only is the EU Commission slowing down green finance, but it is also leading to misdirection of green finance towards supporting business as usual. 

Frank Bold urges the European Commission and EU Member States to maintain its commitment to robust sustainability reporting and due diligence frameworks, ensuring European businesses remain competitive in an increasingly sustainability-focused global economy.

The Omnibus Simplification Package will now be handed over to the co-legislators, the EU Parliament and the EU Council, which will each have to formulate a position on the proposed texts in the upcoming months.