Lawmakers in the European Parliament have reached an agreement on a proposed negotiating position regarding the EU Commission’s Omnibus I initiative. This proposal aims to significantly reduce the EU’s sustainability reporting and due diligence regulations beyond the initial suggestions of the Commission.
The agreement involves substantial cuts to the number of companies governed by the Corporate Sustainability Due Diligence Directive (CSDDD), limiting the regulation to only the largest businesses. These companies are obligated to address their negative impacts on human rights and the environment throughout their value chains.
The Omnibus package was unveiled by the Commission in February as part of its agenda to simplify regulations, enhance European competitiveness, and reduce compliance burdens on companies. It proposes extensive changes to regulations, including the Corporate Sustainability Reporting Directive (CSRD), the CSDDD, the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM).
Among the Commission’s most notable proposed changes was a significant increase in the scope for the CSRD, excluding approximately 80% of companies by raising the employee threshold from 250 to more than 1,000. While maintaining the CSDDD’s 1,000 employee threshold, the due diligence requirement would focus primarily on direct business partners. Additionally, it limits the information smaller supply chain companies must provide under the regulations.
Lawmakers have been divided over Parliament’s position heading into the Omnibus package negotiations. Left-leaning parties advocated for minimal cuts to the regulations, while farther-right parties sought to eliminate the CSRD and CSDDD entirely. Omnibus rapporteur Jörgen Warborn of the European People’s Party (EPP) recently suggested raising the regulation thresholds to 3,000 employees.
Following intense negotiations, left and centre parties agreed on a “compromise” package proposed by the EPP. This package maintains the CSRD’s 1,000 employee threshold but adds a €450 million revenue threshold. It also significantly raises the CSDDD threshold to cover only companies with 5,000 employees and revenues exceeding €1.5 billion. The CSDDD will transition to a “risk-based approach” for due diligence, departing from the previous entity-based approach.
The compromise was reached after the EPP reportedly threatened to support the farther-right parties’ proposal to increase the CSRD scope to 1,750 employees and remove CSDDD requirements for climate transition plans.
The agreed position will be presented for a vote in Parliament’s Legal Affairs committee early next week, followed by a full Parliament vote later this month to establish its position for negotiations with the EU Council. Several aspects of the agreement align with the Council’s agreed position, including the CSRD and CSDDD thresholds and the risk-based approach for the CSDDD.
