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

[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 second 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

The Omnibus legislative package presents not merely a set of incremental amendments but a fundamental reshaping of the EU’s vision for corporate sustainability and accountability. This post delves into the contentious landscape, highlighting how civil society groups, investor coalitions, business associations, and political factions have clashed over the future of corporate regulation in the EU.

Stakeholder Reactions 

Civil Society and Trade Unions

The Omnibus proposal triggered near-universal condemnation from civil society, human rights, and environmental groups. The European Coalition for Corporate Justice (ECCJ) sharply criticized the amendments as “full-scale deregulation designed to dismantle corporate accountability,” arguing they would regress Europe to ineffective voluntary CSR standards, leaving corporate abuses unchecked. WWF echoed these concerns, describing the changes as “a devastating blow to EU environmental objectives,” and climate activists emphasized that removing climate plan requirements is particularly troubling given urgent calls for corporate action on emissions. Trade unions, including the European Trade Union Confederation (ETUC), highlighted that weakening due diligence risks exposing workers in global supply chains to exploitation and dangerous conditions. A joint statement from over 170 organizations launched the #NoToOmnibus campaign, uniting NGOs, trade unions, parliamentarians, and influential figures across sectors in opposition to the proposal.

On April 18, a group of eight civil society organizations filed a complaint that prompted the European Ombudswoman to open a maladministration inquiry into the Commission’s decision to re-open settled legislation without a consultation or impact assessment.

Investor Groups and Financial Sector

Institutional investors managing trillions of euros in assets expressed strong reservations about the weakening of ESG and due diligence standards. A coalition of 211 investors, controlling €6.6 trillion, publicly urged the Commission to maintain robust sustainability frameworks provided by the CSRD and CSDDD, underscoring the necessity of standardized ESG information for informed investment decisions. The UN-backed Principles for Responsible Investment (PRI) warned that diluting these standards undermines market stability and responsible capital allocation. 

The European Banking Federation (EBF) and the European Banking Authority (EBA) have expressed mixed reactions to the Omnibus package. While officially welcoming the simplification and streamlining of the sustainability regulatory framework, the EBF warned that significantly reducing the scope of mandatory ESG reporting under the CSRD would leave banks without critical standardized data, potentially increasing credit risks and operational complexity. Similarly, the EBA highlighted concerns that scaling back ESG reporting could create substantial data gaps, complicating banks’ ability to effectively assess environmental risks in lending decisions.

Business and Industry Groups

Reactions from the business sector have been distinctly divided. Prominent industry associations like BusinessEurope and DigitalEurope welcomed the Omnibus as a much-needed simplification, praising measures intended to streamline compliance burdens, clarify reporting obligations, and maintain rule proportionality. On the other side, a broad array of international corporations has publicly voiced their support for the CSDDD. A group of 14 multinational corporations, including IKEA, Nestlé, and Unilever, published their opposition to reopening the CSDDD in a joint statement. An executive from Nestlé, for instance, was quoted in a Dutch newspaper saying: “Of course … we see that the rules could be simplified … but you don’t have to change the basic legislation. There is an agenda behind [the Omnibus] to partially block those laws.” Joining these voices are nine Finnish businesses, the Cocoa Coalition (six companies, two certification organizations, three NGOs, and two multi-stakeholder organizations), 40 Dutch companies, over 400 chief sustainability officers of French companies, and 10,000 German companies. 

State of Play in EU Institutions and Politics

The Omnibus proposal has exposed significant rifts along familiar lines: The European Parliament’s center-left Socialists & Democrats (S&D) and Green parties want to preserve the CSDDD’s original purpose and scope, while the center-right European People’s Party (EPP), which formerly supported the CSDDD, now argues that deregulation will lower costs and shore up European competitiveness. 

In Parliament, rapporteur Jörgen Warborn (EPP and chief negotiator of omnibus simplification) went further than the Omnibus. On May 26, he proposed a draft that would limit both CSRD and CSDDD to firms with 3,000+ employees and €450 million ($500 million) turnover, abolish mandatory climate transition plans, and prohibit Member States from exceeding the ceiling set by the directive when transposing it. Greens and Socialists have branded the draft as “an attempt to render Europe’s flagship sustainability laws irrelevant.” 

On June 23, EU ministers adopted a “general approach” (a political agreement to a legislative proposal) empowering the Danish Presidency (from July 1) to open trilogues once Parliament votes in October. The approach keeps the Commission’s 1,000-employee CSRD threshold but pushes the CSDDD threshold up to 5,000 employees and €1.5 billion ($1.75 billion) turnover, removes the civil liability article, and delays enforcement until July 2028. 

Committee negotiations will run through September, with a plenary vote slated for October 13.

Germany’s Pivot and Its Ripple Effect

Domestic politics in Germany have reshaped the CSDDD debate. Following snap elections in February 2025, the new governing coalition of CDU-SPD proposed an agreement that commits the government to “abolish the National Supply Chain Due Diligence Act.” While it sounds hyperbolic, the reality is more nuanced. The parties intend to suspend the LkSG’s reporting duties and fines (save for “massive human rights violations”), and rely instead on a future EU implementation law (such as the CSDDD). Chancellor Friedrich Merz has since joined President Macron in calling for the EU to not just postpone the CSDDD but to consider scrapping the directive altogether. Berlin’s shift removes a key advocate for a robust EU standard and strengthens the pro-simplification camp led by Poland, Italy and Greece. 

Potential Legislative Outcomes and Scenarios

European Parliament’s Legal Affairs (JURI) Committee is expected to vote in October. Because the Council mandate is already fixed, trilogues (interinstitutional negotiations) could take place by the end of the year, with a political deal arriving before the December European Council. Final adoption could therefore come in early 2026.

Nevertheless, resistance from left and green factions, liberal MEPs uneasy about dismantling sustainability rules, and Member States critical of diluted standards may alter or defeat the proposal. Lobbying by civil society, investors, and progressive businesses could prove decisive. Several outcomes are possible:

1. Significant dilution followed by adoption (most likely). Parliament and Council converge on thresholds somewhere between the Council’s 5,000-employee threshold and the rapporteur’s 3,000, drop the civil liability article, and endorse longer phase-in dates. Germany and France have moved into the simplification camp, making it likely they will have the majority needed in the Council. 
2. Partial restoration through trilogue trade-offs (unlikely). Greens, Socialists, and a slice of Renew MEPs could extract concessions—perhaps a narrower liability clause or lower employee thresholds—in exchange for accepting the rest of the package. The final text still weakens the original CSDDD but preserves one or two red lines.
3. Outright rejection or indefinite stalemate (least likely). Parliament refuses to sign off, or a small coalition of Member States revives opposition. Given that Germany and France now favor a weakened CSDDD, assembling the blocking minority (35% of EU population or 13 states) would be difficult. This is a long shot scenario.

This process could be protracted. Some companies might slow their due diligence efforts until the outcome is clearer, while others may continue implementing the original CSDDD on the assumption that at least some of its key elements will remain intact.

Broader Legal and Policy Implications

Regulatory Uncertainty

Companies that have begun adjusting policies and supply chain practices in anticipation of the CSDDD must now navigate an uncertain legislative landscape. If the Omnibus is adopted in its current or amended form, they may be tempted to scale back or postpone HRDD initiatives, knowing that some obligations could be delayed, relaxed, or removed. If, however, the Omnibus fails to pass or undergoes substantial amendment, the original directive may remain largely intact, potentially leaving companies that paused their preparations exposed. This dual risk—either over-investing in compliance measures that become unnecessary or under-preparing for measures that remain in place—creates a disincentive for firms to invest fully in the robust, continuous due diligence systems envisioned by the original directive.

Loss of a Uniform Civil Liability Standard

Under the original CSDDD, victims of corporate abuses would have had a harmonized avenue for legal redress in EU courts. By deleting the requirement for harmonized civil liability, the Omnibus defers entirely to national tort laws, where many Member States do not currently recognize a clear duty of care for extraterritorial harms. Additionally, the deletion of the provision enabling NGOs and trade unions to bring representative actions places the burden of initiating transnational litigation solely on individual victims—often rural communities, migrant workers, or Indigenous peoples lacking sufficient resources for protracted legal proceedings—and the absence of collective redress procedures under EU law further diminishes the likelihood of meaningful remedy. 

Misalignment with International Standards and Practices

Removing the Directive’s broader value chain coverage, restricting due diligence primarily to tier-1 entities, and reviewing compliance only once every five years all conflict with the risk-based approach in the UN Guiding Principles on Business and Human Rights. Those principles call for continuous, iterative due diligence focused on the severity and likelihood of harm, rather than a box-ticking exercise at prescribed intervals. The shift to a five-year cycle weakens the standard of care, impedes ongoing oversight, and risks missing evolving abuses—such as a newly subcontracted factory with poor labor conditions. By sidelining the requirement to monitor all relevant tiers of a company’s operations, the Omnibus proposal further deviates from recognized international frameworks that emphasize prioritizing risks to people over administrative convenience or narrow supply chain boundaries. 

Chilling Effect on National Legislation

By introducing a maximum harmonization clause, the Omnibus could prohibit Member States from adopting or retaining stronger national due diligence rules. That clause would directly undermine existing frameworks like France’s Duty of Vigilance Law, thereby eroding well-established protections and dissuading other Member States from experimenting with more ambitious standards. Rather than promoting uniformity at a higher level of protection, maximum harmonization here risks leveling down, stalling the momentum behind robust national legislation and reversing hard-won gains in corporate accountability at the Member State level. 

Erosion of Director Accountability

Earlier iterations of the Directive contemplated explicit duties on corporate directors to incorporate human rights considerations into company decisions. Although the final 2024 text had already watered down these governance provisions, the Omnibus proposal would weaken them further. Directors inclined to champion stronger oversight might lose the legal mandate and leverage provided by the original CSDDD, allowing boards to focus on narrow compliance or short-term economic objectives at the expense of long-term human rights and sustainability concerns. This rollback moves in the opposite direction of emerging global corporate governance trends, where directors are increasingly expected to account for the interests of diverse stakeholders, including communities in affected supply chains.

What’s at Stake for the EU and Responsible Business Conduct?

The EU’s CSDDD was a carefully negotiated milestone in binding corporate accountability and requiring responsible business conduct. The unveiling of the Omnibus legislative package, however, raises the prospect of “death by omnibus”—in other words, the dismantling of a law that was meant to usher in a new era of business and human rights compliance. By stripping away key obligations, limiting supply chain coverage, delaying implementation, and excising civil liability provisions, the Omnibus risks thwarting the progress that the Directive’s adoption symbolized.

The eventual form—or survival—of the CSDDD will be a defining test of the EU’s commitment to maintain its self-proclaimed leadership role in sustainable development and human rights protection. Should the Directive be effectively gutted, the EU might well forfeit that role to a mosaic of national laws and non-EU frameworks, exposing multinational corporations to an increasingly fragmented regulatory landscape and undermining the very rationale behind the CSDDD’s original promise of harmonization and heightened accountability. This fragmented landscape is the subject of Part III of this series.