Among the critical changes proposed, the proposal would drastically reform the most significant obligation for companies in-scope of the CSDDD by easing the requirement that they conduct environmental and human rights due diligence on their entire global chain of activities to instead only include business partners directly above and below them in the supply chain. Such an assessment would only be required for ‘indirect’ business partners where the relevant company has “plausible information” that an adverse impact has occurred. Similarly, the proposed changes to the CSRD would exclude SMEs and small mid-caps, thereby reducing the number of companies in scope by 80%.
Global ESG regulation is at a crossroads. However, it remains to be seen whether the proposed Omnibus Directive will be adopted by the European Parliament and Council and—given the politicised nature of the topic—in what form. Whatever the outcome, what is clear is that there is limited appetite in the EU to exclude the operations of large global corporations entirely from the ambit of European sustainability laws, noting the press release describes the proposals as being intended to “focus [the EU] regulatory framework on the largest companies which are likely to have a bigger impact on the climate and environment”.