First Omnibus Package to relax the obligations of the CSDDD, CSRD and EU taxonomy

The EU Commission has today published the draft of the first announced Omnibus Package. With the first directive as part of the omnibus initiative, the Commission wants to amend the CSRD, the CSDDD and the EU taxonomy in particular.

At the end of January, the Commission presented the EU Competitiveness Compass, which is based on the recommendations of the Draghi report. One of the focal points of the EU Compass is a roadmap for competitiveness. In particular, the reporting and due diligence obligations under the Green Deal are to be simplified, thereby reducing the administrative burden. More companies than before are to be completely exempted from the obligations. In addition to the draft of the first Omnibus Directive, further directives are planned, which will affect the CBAM, the InvestEU Regulation and the EFSI Regulation, for example.

Planned changes to the CSRD

The EU Commission would like to harmonise the application thresholds of the CSRD and CSDDD. In future, only companies with more than 1,000 employees and either more than 50 million euros in turnover or a balance sheet total of more than 25 million euros will have to submit a sustainability report in accordance with the CSRD. This is intended to reduce the number of companies subject to the CSRD by around 80 percent. Previously, two of the three criteria had to be exceeded: more than 50 million euros in turnover, a balance sheet total of more than 25 million euros or more than 250 employees. In addition, the ESRS and the obligations under the EU Taxonomy Regulation are also to be adjusted and the reporting obligations for companies in the second wave are to be postponed by two years. Listed SMEs are to be completely excluded from the from the scope of application of the CSRD. SMEs are to be relieved by the fact that the companies obliged by the CSRD are no longer allowed to collect all information from SMEs for the purposes of their own sustainability reporting.

The European Supply Chain Directive CSDDD is to be mitigated

The Commission now wants to further simplify the European Supply Chain Directive CSDDD, which had already been weakened before its adoption on 13 June 2024 at the insistence of individual member states.

Identification and assessment of negative impacts only in relation to direct business partners

The CSDDD stipulates that companies must assess and identify actual and potential negative impacts in relation to the entire chain of activities. This includes their own business activities, those of their subsidiaries and all direct and indirect business partners. The EU Commission would now like to limit these due diligence obligations to its own activities, those of subsidiaries and those of direct business partners, i.e. exclude indirect business partners in principle, except where there are indications of risks or violations. The due diligence obligations would then be similar to those of the German Supply Chain Due Diligence Act (LkSG).

According to the proposal, information for the general mapping of risk areas should also no longer be able to be requested from direct business partners with fewer than 500 employees if it goes beyond the information required by the VSME standart under the CSRD.

The obligation to terminate contracts is to be dropped

The current CSDDD obliges companies to terminate the contractual relationship under certain conditions if a milder remedy – such as a suspension of the contractual relationship and corrective action plans – does not promise success in the event of serious potential or actual negative effects. The obligation to terminate business relationships is to be removed in order to avoid disrupting production-critical supply chains, for example, and to give suppliers the opportunity to improve the situation. Instead, the focus should be on a temporary suspension of the contractual relationship.

Fewer stakeholders need to be involved

To date, the involvement of stakeholders has been required for numerous steps of due diligence. In addition to those directly affected, stakeholders include consumers and human rights and environmental organizations. The circle of stakeholders to be included is to be reduced to those directly affected and their representatives. The sub-areas of the due diligence obligations in which stakeholders are to be involved are also to be reduced.

Monitoring effort to be reduced

According to the current CSDDD, the appropriateness and effectiveness of measures to identify, prevent, mitigate, remedy and minimize the extent of negative impacts must be reviewed at least every twelve months. The EU Commission wants to reduce the workload by only requiring companies to take monitoring measures every five years and when there is a specific reason to do so.

Climate plans should no longer have to be implemented

In addition to the due diligence obligations, the current CSDDD also obliges companies to draw up a climate plan with measures that must also be implemented. The Commission wants to weaken this obligation. Climate plans must contain implementation measures. However, the actual implementation should no longer be explicitly mandatory.

Sanctions and liability: Member states to be given more freedom of decision

Instead of a minimum upper limit for sanctions of 5 percent of global net turnover, the Commission now only wants to provide guidelines. The EU Commission also wants to give member states a free hand with regard to civil liability. Currently, member states are required to ensure that companies can also be held liable under civil law in the event of culpable infringements. This obligation is now to be dropped.

Commission strives for greater harmonization

The EU Commission also wants to reduce the member states’ room for manoeuvre. The aim is for the transposition laws of the individual EU member states to diverge less. Accordingly, the areas in which the member states cannot adopt divergent regulations are to be extended to include

– the requirements for due diligence at group level,
– all requirements for the identification of adverse impacts, with the exception of    requirements on the termination of contractual relationships, preventive measures and the remediation of actual adverse impacts and
– the requirements for the complaints procedure.

Start of CSDDD to be postponed by one year

The EU Commission wants to give companies more time for implementation. Instead of July 26, 2027, the first companies should not apply the CSDDD until July 26, 2028. To enable companies to plan better, the countries should transpose the directive into national laws more quickly. The implementation period should only be twelve months from the entry into force of the proposed amendments. In addition, the Commission’s specific guidelines on the fulfillment of due diligence obligations should also be presented six months earlier than previously planned, namely on July 26, 2026.

Parliament and Council still have to approve the Omnibus Package

The next step is for the EU Parliament and the Council to discuss the proposal. It is likely that the Omnibus Directive will then be amended.

What the planned changes mean for companies

The changes would ease the burden on business to a greater or lesser extent. Companies with a maximum of 1,000 employees would be exempt from the obligations of the CSRD and some affected companies would only have to report for the first time later than before.
Under the CSDDD, numerous detailed obligations would be removed. The effort required for investigations and assessments of negative impacts would be reduced and simplified, as only direct business partners and no longer the entire chain of activities would have to be reviewed. The risk of specific civil liability would also be eliminated. Smaller companies with fewer than 500 employees would only have to provide limited information. Companies would only have to carry out unprovoked monitoring measures every 5 years instead of annually. Companies would only have to involve stakeholders to a reduced extent. Overall, the planned measures could help to reduce the burden on companies, although in practice the specific scope will depend heavily on the respective risk situation and supplier structure of a company.
Companies can and should use the longer preparation time, should it be adopted, to integrate the obligations arising from the CSDDD into their governance.