The EU has published its highly anticipated Omnibus proposal. Last week, we discussed the proposed changes to the Corporate Sustainability Reporting Directive (CSRD). The proposal also stands to fundamentally change the Corporate Sustainability Due Diligence Directive (CSDDD). Major changes include the following:
- Limiting due diligence requirements to direct value chain partners. Requiring assessment of non-indirect partners only if the company obtains plausible information suggesting an adverse impact has arisen or may arise.
- Limiting the amount of information companies can request from value chain partners with less than 500 employees.
- Requiring the adoption of a climate transition plan but only requiring disclosure on implementation actions planned or taken, rather than directly mandating implementation.
- Extending the “maximum harmonization” limit for core elements (meaning that member states cannot introduce laws that extend beyond the CSDDD’s requirements in key areas).
- Removing the duty to terminate the business relationship for supply chain partners found violating certain provisions.
- Limiting who qualifies as a “stakeholder” and how often stakeholder engagement is required.
- Changing the annual evaluation of company due diligence practices to five-year intervals.
- Removing mandatory minimum fines and removing most civil liability requirements and rules regarding representative actions.
- Removing the possibility of adopting new due diligence requirements tailored to financial service firms.
- Delaying implementation by a year and accelerating standard promulgation by one year.
The CSDDD cuts under the Omnibus proposal are deeper and more structural than cuts to the CSRD. This is unsurprising considering the CSDDD has been a hot-button political issue for some time. During its development, the CSDDD underwent dramatic changes, losing many of its initial requirements in negotiations. Many consider the existing version of the law to be watered down from its initial vision, and the Omnibus amendments would further defang the directive. Now, the Omnibus proposal process is underway and we’ll cover the twists and turns, as well as any further changes to the CSRD or CSDDD.
Our members can learn more about CSDDD here.
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