Death by Omnibus? The European Commission’s Proposal and the Fate of the Corporate Sustainability Due Diligence Directive (Part I)

[Jacob Bogart (X: @BogartJacob) is Counsel at Perseus Strategies, a 2025 Salzburg Global International Law Fellow and graduate of Columbia Law School]

This post is the first part in a three-part series on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Part I dissects the Omnibus and other reform proposals. Part II maps the reactions to and legal implications of these proposals. Part III argues that companies should adopt a UNGP/OECD-based model even if the CSDDD itself is delayed and diluted.

Introduction: A Directive in Danger

The European Union’s (EU) Corporate Sustainability Due Diligence Directive (CSDDD) was intended as a paradigm shift in mandating, harmonizing, and reinforcing corporate respect for human rights and the environment across the continent. Adopted in mid-2024 following fraught negotiations, the Directive—in its original form—was poised to enforce a standardized, mandatory framework for identifying, preventing, mitigating, and remedying adverse corporate impacts on human rights and the environment. Proponents lauded it as a turning point in the EU’s commitment to responsible business conduct.

Recent developments suggest, however, that this new framework may be in jeopardy of unraveling. On February 26, 2025, the European Commission announced the “Omnibus” legislative package, a set of amendments revisiting multiple sustainability regulations of the European Green Deal, including the recently sealed CSDDD. Some commentators, including one Member of the European Parliament, have branded the Omnibus proposal as “massive deregulation,” while a coalition of civil society organizations (CSOs) argued it would lead to a “race to the bottom in value chain standards.” Despite the strong language from critics, supporters of the Omnibus, such as industry lobby group BusinessEurope, applauded it as a “positive step towards making it easier to do business in Europe.” 

On April 3, 2025, the European Parliament approved and the Council later adopted the so-called “Stop-the-Clock” Directive—part of the Omnibus package—by 427 votes to 221, thereby postponing the application dates of both the CSDDD and the Corporate Sustainability Reporting Directive (CSRD) by two years and one year, respectively (the delay concerns timing only; the underlying duties are unchanged for now).

The February 2025 package has since proven to be just the first step: the Commission introduced multiple further “Omnibus” proposals through Spring 2025, including measures affecting EU farm policy and small and medium-sized enterprises (SMEs) compliance in an effort aimed at “cutting red tape.” Additionally, the European Parliament and Council have each made proposals to limit even further the impact and scope of the CSDDD beyond the Omnibus’ initial proposal.  

Against this backdrop, the present article examines how the CSDDD’s original aims and obligations would be undermined by key provisions in the Omnibus proposal. It further assesses the likely impact on corporate accountability, the broader EU legislative landscape, and the emerging patchwork of national and sectoral rules on mandatory human rights due diligence (HRDD). Although the legislative process is still ongoing, the Omnibus raises far-reaching implications for the future of the EU’s leadership on responsible business conduct.

The CSDDD’s Origins and Aims

The CSDDD emerged amidst growing pressure to impose binding human rights and environmental standards on businesses operating in, or doing significant business with, the European Union. Initially presented in draft form by the European Commission in early 2022, the CSDDD took inspiration from global norms such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. It also reflected an ongoing shift in Europe away from voluntary corporate social responsibility (CSR) codes toward legal obligations.

The original draft ambitiously proposed broad application, due diligence across entire value chains, mandatory director oversight, and climate transition plans. However, intensive lobbying and political compromise significantly narrowed the scope of the adopted Directive 2024/1760, limiting its applicability to only the largest companies and focusing on defined “chains of activities” rather than full value chains. Notably, explicit duties for corporate directors were removed entirely.

Despite these limitations, the final CSDDD retained essential HRDD obligations. Covered companies must:

• Embed human rights and environmental due diligence into corporate policies.
• Identify and assess actual or potential adverse impacts across operations and defined chains of activities.
• Take appropriate measures to prevent, mitigate, cease, or remedy identified harms, including through corrective action plans, investments in infrastructure or production adjustments, and contractual assurances.
• Meaningfully engage with stakeholders and establish effective grievance mechanisms.
• Monitor the effectiveness of their due diligence efforts.
• Publicly report on due diligence activities annually, subject to regulatory oversight.

The Directive preserved important enforcement mechanisms, including administrative penalties and an EU-wide civil liability provision enabling victims to seek remedies for corporate harm. As a result, the CSDDD was celebrated as a landmark piece of legislation that sought to fundamentally reshape corporate conduct in Europe, even as its loftiest goals had been dropped.

The Omnibus Proposal and Related Measures

Although the CSDDD was only formally adopted in June 2024, signs of impending revision emerged shortly thereafter. In a November 2024 press conference, European Commission President Ursula von der Leyen characterized existing sustainability reporting requirements—including the CSDDD, the CSRD, and the Taxonomy Regulation—as excessively burdensome, redundant, and overlapping. She proposed consolidating these separate instruments into a single “omnibus regulation,” echoing the EU’s recent “Budapest Declaration,” which explicitly called for a regulatory “simplification revolution” aimed at enhancing EU competitiveness by reducing reporting burdens by at least 25%.

The Commission’s direction became explicit in its January 2025 communication, “A Competitiveness Compass for the EU,” confirming plans for the Omnibus legislative package. The proposed reforms promised a 25% overall reduction in corporate reporting burdens (35% for SMEs), potentially cutting recurring compliance costs by roughly €37.5 billion ($39.3 billion). Despite von der Leyen assurances that the content of the regulations would remain intact, civil society and human rights advocates voiced immediate concern, cautioning that simplification could significantly weaken recently established sustainability and human rights protections.

The Omnibus legislative package formally proposed by the European Commission on February 26, 2025, was presented explicitly as a measure to simplify EU regulations, boost competitiveness, and attract investment. Reiterating its previously stated objectives, the Commission claimed the proposal would achieve at least a 25% reduction in corporate administrative burdens (35% for SMEs), translating into roughly €6.3 billion ($6.6 billion) in annual savings and mobilizing up to €50 billion ($52 billion) in additional public and private investment capacity. President Ursula von der Leyen summarized the initiative succinctly: “Simplification promised, simplification delivered.” 

In response to the Commission’s Omnibus package, other proposals have emerged from the EU Parliament and Council that would shift the criteria for applicability even more. On June 23, June national ministers reached political agreement on a draft that would confine CSRD reporting to companies with at least 1,000 employees and €450 million ($527 million) in turnover. The proposal would also limit the CSDDD’s obligations to companies with at least 5,000 employees and €1.5 billion ($1.75 billion) in turnover, among other changes to the CSDDD. The text is still a draft; it becomes law only after Parliament and Council adopt a common version (discussed in more detail in Part II of this series).

Two weeks earlier, on May 26, Parliament’s rapporteur Jörgen Warborn circulated an even stricter draft: a single bar of 3,000 employees and €450 million ($527 million) for all related laws, deletion of the climate transition-plan obligation, and a prohibition on Member States adding tougher national rules (“gold plating”). Parliament will finalize its position only after committee and plenary votes scheduled for October.

How the Omnibus Would Undermine the CSDDD

With the discussions and proposals amending the CSDDD frequently shifting, the following analysis largely centers on the Commission’s original Omnibus proposal of February 2025, which would substantially alter many core provisions of the Directive. However, where relevant, the discussion will include aspects of the recent proposals that further limit the scope of the CSDDD. Among the most consequential changes, the proposal would:

1. Restrict the Scope of Due Diligence (Article 8(2)): Originally, the CSDDD required comprehensive due diligence across companies’ entire chain of activities, extending well beyond direct suppliers. Under the Omnibus, this obligation is narrowed primarily to direct business partners (tier-1 suppliers and contractors). Deeper assessments of indirect suppliers would be mandated only if companies have “plausible information” suggesting adverse impacts. The European Parliament’s May draft permits companies, at the scoping stage, to rely solely on information that is already “reasonably available” and to request additional data from suppliers only in narrowly defined, risk-based circumstances. The Council’s June 23 general approach follows the same direction, describing the exercise as risk-based and requiring companies to look beyond direct partners only where “objective and verifiable information” points to a specific adverse impact; it also inserts a review clause to reconsider scope after the first application cycle. In each draft, therefore, value chain due diligence is replaced by a much narrower obligation focused on immediate suppliers.
2. Reduce the Frequency of Due Diligence Monitoring (Article 15): Companies would shift from annual monitoring of due diligence practices to evaluations once every five years, with interim assessments required only if significant new risks arise. Such infrequent oversight undermines the principle of ongoing vigilance essential to effective due diligence.
3. Limit Data Collection from SMEs (Article 8(5)): Companies would no longer routinely request information from business partners with fewer than 500 employees during initial risk-mapping phases, unless objective indications of serious harm exist or the necessary data cannot be obtained through other means. The European Parliament’s rapporteur draft raises that ceiling to 3,000 employees and, at the initial scoping stage, bars all information requests to all suppliers unless the same two risk-based conditions are met later in the process. While intended to alleviate administrative burdens on SMEs, this revision could lead companies to overlook critical risk information from smaller partners in high-risk sectors.
4. Narrow the Definition of Stakeholders (Article 3): The proposal restricts stakeholder engagement obligations by limiting stakeholders to employees, trade unions, and communities directly affected by corporate operations. Crucially, it excludes broader civil society groups, consumer advocates, and human rights experts, thereby diminishing external accountability and narrowing companies’ perspectives on potential impacts.
5. Eliminate Mandatory EU-wide Civil Liability (Article 29): Previously, the CSDDD mandated a harmonized civil liability regime across the EU, allowing victims clear avenues for compensation. The Omnibus removes this requirement, leaving the establishment of liability mechanisms entirely to Member States’ discretion, creating potential inconsistencies, forum shopping, and weakening corporate accountability. Similarly, the text empowering NGOs and trade unions to bring representative legal actions is deleted under the Omnibus. 
6. Weaken Business Relationship Termination Requirements (Articles 10 & 11): Under the CSDDD, a company that could not prevent or remedy a severe impact within a fixed timetable of an “enhanced corrective action plan” had to terminate the relevant business relationship as a last resort. The Omnibus deletes that obligation and its deadlines: the company may instead keep engaging while it suspends dealings and pursues an enhanced plan, and it is shielded from liability as long as there is a “reasonable expectation” of success. The Parliament rapporteur draft accepts this structure but allows suspension to be withheld if it would cause “substantial prejudice” to the company. The Council’s general approach follows the Commission text, adding that the suspension and plan may continue “until the impact is addressed.” Taken together, the three drafts replace a mandatory, time-bound termination requirement with an open-ended, discretionary suspension regime that weakens leverage over problematic suppliers.
7. Delay the Implementation Timeline (Article 37): The “Stop-the-Clock” Directive has now legally postponed the first compliance phase to July 2028, with subsequent phases pushed back equivalently.
8. Remove the Minimum Penalty Threshold (Article 27(4)): Currently, the Directive specifies minimum administrative penalties of no less than 5% of worldwide turnover. The Omnibus and related proposals remove this threshold, providing Member States greater discretion in penalty determination, potentially reducing incentives for corporate compliance.
9. Expand Maximum Harmonization Across Member States (Article 4): The Omnibus proposal extends the scope of maximum harmonization, preventing Member States from imposing any additional national due diligence requirements beyond the (now weaker) EU standard. In other words, it seeks to make the Directive a ceiling, not just a floor. The Parliament proposal adds to the list of maximum harmonization, while the Council general approach permits more stringent national laws.
10. Relax Climate Transition Plan Obligations (22(1)): Although companies would still be required to adopt climate transition plans, the Omnibus removes the binding requirement to “put into effect” such plans. Parliament rapporteur’s draft goes a step further, making a plan mandatory only if the company already has one or if climate risks are “material,” and it allows firms merely to describe intended actions. The Council’s general approach follows the Commission on substance yet postpones the requirement by two years and requires companies to only show their plans consist of “reasonable” efforts, instead of “best” efforts.

Conclusion

In summary, the substantive changes in the Omnibus proposal and related texts would collectively limit the scope, scale and effectiveness of the CSDDD. The likely result would be a directive that is easier for companies to satisfy formally, but dramatically less effective in achieving its underlying aims of preventing harm and ensuring remedy. Robust HRDD systems are, at their core, early-warning mechanisms: by mapping supply chains, continuously assessing risk, and engaging affected stakeholders, they give companies real-time visibility into upstream and downstream operations and allow problems to be addressed before they escalate into legal, financial, or reputational crises. Weakening those obligations leaves firms with little insight into where, for example, forced labor, land-grabbing or toxic-waste risks may be happening.

For victims of corporate abuse and communities affected by supply chain practices, these changes signal fewer avenues for recourse and less proactive corporate oversight of risk. For companies, it reduces compliance costs in the short term, but at the possible cost of increased legal uncertainty (as national laws and litigation will fill the void differently across jurisdictions) and a loss of the “level playing field” that a strong, harmonized EU standard promised to create. This point has been raised by FIDH and others: the U-turn “penalises the many companies and investors that have supported the CSDDD and put in time and resources for compliance,” undermining the level playing field and incentive structure for corporate sustainability.