Omnibus proposals - Changes the European Parliament and the Council must make to uphold the CSDDD

At this pivotal stage in the process, we urge Members of the European Parliament and Member States to correct certain changes and measures included in the Omnibus package in order to stay true to the ambitions laid out in the original Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).

Below, we cover the key elements in the Omnibus proposal for the CSDDD, their practical implications, and the necessary changes that must be made to prevent a complete backpedaling of the commitments to the EU Green Deal. 

Corporate Sustainability Due Diligence Directive (CSDDD)

The Omnibus has proposed to:

1. Curtail the risk-based approach to due diligence 
2. Potentially limit the engagement with mid-size and smaller suppliers
3. Remove the obligation for climate transition plans to be “put into effect”

These proposals will reduce the CSDDD’s ability to effectively address human rights violations and environmental harm in companies' value chains:‍

1. On the risk-based approach:

• Narrowing the identification of impacts to direct business partners (tier 1) means that the environmental damage or human rights abuse that takes place further up/down the value chain (such as child labour or forced labour) will no longer be scrutinised. Given that the most severe impacts often take place at this level of the value chain, this proposal drastically hampers the CSDDD’s ability to realise effective redress of justice and risks leaving companies themselves in the dark. It will make companies spend resources on actors in their value chains that are not responsible for negative impacts.

• This proposal will also likely lead to more contractual cascading which will in turn place more pressure on SMEs, precisely the opposite of the supposed overarching aim of the Omnibus package to ease the regulatory burden on SMEs.

2. On the value chain cap

• The Commission also proposed a general rule limiting information requests to companies with less than 500 employees (SMEs and mid-sized companies)  to the data required by the Voluntary Sustainability Reporting Standard (VSME), with a  derogation in case the VSME does not cover relevant data on impacts and  “information cannot reasonably be obtained by other means”.

• This proposal risks impacting the way larger companies engage with smaller actors in their value chains in practice: engagement with suppliers and building reliable relationships is key to effective due diligence. This is one key lesson learned by companies, such as from the cocoa sector that are trying to tackle systemic problems like child labour in their supply chains.

3. On climate transition plans:

• In leaving out the obligation for companies to put into effect climate transition plans, this Omnibus proposal essentially puts at risk the EU’s own climate goals.

• CTPs risks being reduced to a tick box exercise, no longer carrying the power to lead to a transition of business practices since there is no requirement for implementation.

Our recommendations

As a result, we call on the European Parliament and the Council to reject these changes by:

• Keeping a risk-based approach to due diligence in the CSDDD.
  
  • A targeted risk based approach would be much more effective in cutting down the administrative load that due diligence will place on companies whilst still effectively targeting the riskiest impacts in their value chains.
• Reinstating the ‘put into effect’ duty in Article 22. 

Without these changes, the CSDDD’s impact will be significantly watered down. We therefore urge the Council and the European Parliament to take note of our recommendations to maintain an effective due diligence process.