Brussels is reaching out to EU businesses and aims to reduce bureaucracy related to the Supply Chain Directive. On Wednesday, 26 February, the European Commission (EC) presented a simplification package, “Omnibus 1”, which includes, among other measures, postponing the implementation of the controversial CSDDD by one year—until 2028—and easing the requirements of the CSRD.
The CSDDD applies to companies with 1,000 or more employees and an annual turnover of at least €450 million. It requires these businesses to exercise due diligence by continuously monitoring their own activities, as well as those of entities within their value chain, to assess their impact on the environment and human rights. As with the CSRD, the directive may also indirectly affect smaller businesses if they are part of the value chain of a regulated company.
“Omnibus 1” is part of a broader package of reforms designed to support European businesses. These reforms also include incentives to encourage industrial decarbonisation and measures to reduce energy costs. The Commission’s objective is to enhance Europe’s competitiveness against the United States and China.
Regulations will apply to the largest companies
In the first phase, set for the first half of 2025, the European Commission aims to reduce reporting burdens by 25%, which is expected to generate €40 billion ($42 billion) in savings for European businesses.
Here are the main changes regarding sustainability reporting (CSRD):
- Approximately 80% of companies will be removed from the scope of the CSRD, ensuring that sustainability reporting obligations focus primarily on the largest companies, which have the greatest impact on people and the environment.
- Sustainability reporting requirements for large companies will be adjusted to ensure they do not create an excessive burden on smaller companies within their value chains.
- The reporting obligations for companies currently covered by the CSRD will be postponed by two years, meaning businesses originally required to report from 2026 or 2027 will now start in 2028.
- Reporting obligations under the EU taxonomy will be reduced, with requirements limited to the largest companies covered by the CSDDD, while allowing other large companies to continue voluntary reporting if they wish to access sustainable finance. This change is expected to significantly lower costs for smaller companies.
Changes to the CSDDD Directive in “Omnibus 1”
The European Commission is also proposing the following adjustments to the CSDDD:
- Postponing the deadline for transposition of the directive by Member States to 2028.
- Limiting due diligence obligations to direct business relationships, meaning companies will need to monitor their suppliers for human rights violations or environmental damage every five years instead of annually, as initially planned.
- Removing EU civil liability conditions and limiting the amount of information that large companies can require for monitoring their value chains. This aims to prevent a knock-on effect on SMEs.
- Despite the relaxed regulations, the right of injured parties to full compensation for damage caused by non-compliance will remain in force.
By July 2026, the European Commission will issue guidelines to help businesses establish best practices for supply chain management.
Although sustainability reporting rules are being relaxed, the EU remains committed to its net-zero emissions and climate targets.
“EU companies will benefit from streamlined rules. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals. And more simplification is on the way,” said Ursula von der Leyen, President of the European Commission, in a statement.