The Omnibus Simplification Package: Why Proper Supply Chain Due Diligence and Reporting are as Crucial as Ever

The Omnibus Simplification Package, published by the European Commission in February, represents a strategic effort to balance the EU’s sustainability ambitions with the need to maintain a competitive and business-friendly environment.

As covered in our EU Omnibus Simplification Package explainer, being quite unusual, both in speed and scope, the Omnibus Simplification Package aims to amend the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy delegated act.

Amending laws such as CSRD, which has already been transposed by many EU member states, or such far-reaching laws as CSDDD that require investment from companies in advance, creates a lot of uncertainty. However, this uncertainty should not lead companies to go off-track in terms of preparing for compliance and strengthening the resilience of their supply chains.

In this article, we explore the implications of the omnibus simplification package for companies and what can be done in the period of regulatory uncertainty.

Want someone with deep experience and connections in the EU to help guide your sustainability strategy? Get in touch!

What the Omnibus entails for CSRD and CSDDD compliance

The Omnibus simplification package is made of two distinct proposals, which will undergo the legislative process in parallel. An agreement on the changes will need to be hammered out between Member States and the European Parliament based on the published text that we analyse in this article.

1. Stop the clock proposal

The first legislative proposal is the “stop the clock” proposal, which delays the transposition deadlines and entry into application of the CSRD and CSDDD obligations. Its aim is to provide legal clarity for companies that have to report in 2026 and 2027 for fiscal years 2025 and 2026 respectively, and to give more time to policymakers to negotiate the second proposal that includes more substantial changes to the CSRD and CSDDD.

Important for companies to know: the CSRD will apply as it is in countries where it has already been transposed until the changes are agreed at the European level and transposed into national legislation.

The stop the clock proposal is expected to be adopted before summer 2025. The more substantial omnibus simplification proposal is more contentious and will require months of negotiations.

2. Main omnibus simplification proposal

This simplification proposal includes deep and wide-ranging proposals on amending multiple provisions of CSRD and CSDDD.

Below is a selection of the most significant proposed changes to the CSRD. These changes, if adopted, will undoubtedly have impacts for EU companies and their suppliers.

• Reduction in scope of CSRD. The proposal would restrict the scope of CSRD to companies with more than 1,000 employees and a turnover above EUR 50 million. Whereas previously the entry into application of CSRD was to be phased according to company size, only the biggest companies will now be targeted. Listed SMEs would not be included. This reduction in scope would effectively exempt 80% of companies previously included. It would also align CSRD with the scope of CSDDD, which applies to companies with more than 1,000 employees and a turnover above EUR 450 million.
• Postponing the reporting requirements. For companies that have not yet been covered by the CSRD (start of the reporting obligations in 2026 and 2027), the omnibus would postpone entry into application of the reporting requirements by two years.
• Reducing reporting requirements. The Commission has pledged to revise the European Sustainability Reporting Standards (ESRS) within the six months following the adoption of the proposal, with the objective of reducing the amount of data that companies need to collect.
• Deletion of the provision on sector-specific standards and provision on progressing from limited to reasonable assurance. The European Commission has announced that it would not publish sector-specific standards so as not to increase the number of data points for companies. Similarly, removing the obligation to progress from limited to reasonable assurance requirements should ease compliance and decrease assurance costs.

The EU Corporate Sustainability Due Diligence Directive (CSDDD) would also be considerably impacted by the Omnibus simplification package including:

• Limiting due diligence to direct business partners. Companies will limit their due diligence measures to their own operations, their subsidiaries and direct partners. Exceptions would be cases when they have specific information suggesting a risk of adverse impact further down the supply chain.
• Limiting trickle-down effects. Companies shall limit the amount of information asked from their partners, using the Voluntary SME reporting standard already developed by the Commission, unless such information is necessary and cannot be obtained another way. The revision will greatly reduce the trickle-down effects of the directive on smaller, EU and non-EU players.
• Limiting stakeholder consultation. The omnibus would reduce the scope of the definition of stakeholder and in which steps of due diligence they have to be engaged.
• Assessing less frequently. Companies would conduct assessments of their due diligence measures every five years, as opposed to every year under the current directive.
• Giving Member States more autonomy on civil liability. The new CSDDD would not include an EU-wide civil liability regime, relying instead on national rules.
• Adopting climate transition plans. The plans should include implementation actions planned and taken. However, the requirement to implement them has been removed.

What companies can do to prepare

Waiting for legal certainty before starting preparations for compliance or pausing preparations might seem like the safest approach, but getting ahead of the game can still be an advantage. Due diligence, including data collection and reporting, helps businesses spot risks early, stay resilient, and build trust with customers, investors, and regulators. Some areas you can start to plan for include:

1. Build your resilience with supply chain due diligence

Identifying potential human rights, environmental, or legal risks early makes it easier to manage them before they escalate into serious financial or reputational damage. With the deadlines to be shifted back, organisations should focus on tackling the most essential impacts and risks and progress this over time. Smaller companies can look at the published Voluntary Standard for SMEs to decide which key data points and due diligence requirements to tackle first.

2. Start preparations early

Even if your company is not required to do full-scale due diligence or reporting yet, starting now helps your company build the skills and systems needed for when it becomes mandatory. Learning how to gather data, assess risks, and report on them now will make future compliance much smoother and less expensive. You can develop a roadmap of actions and gradually build the foundation for future compliance. For example, you can focus on collecting data and analysing your most significant impacts on the people and the planet, as well as the risks for the company (double materiality). This CSRD requirement is there to stay. It will also serve you as a basis for conducting due diligence and complying with the CSDDD.

3. Deepen your engagement with your supply chain

Even if the scope of CSDDD could be generally limited to direct business partners, you will not be able to address your biggest environmental and social impacts without engagement with the deeper tiers of your supply chain. For most companies, especially in sectors such as agri-food, textiles and apparel, and retail, 80-90% of their environmental and social impact occurs in the deeper supply chain.

4. Orient yourselves on the international principles

The CSRD and the CSDDD have been designed with the UN guiding principles on business and human rights, and the OECD due diligence guidance for responsible business conduct in mind. Those norms already include guidance on responsible business conduct and due diligence for companies of all sizes. They can provide a useful basis for conducting due diligence and reporting on it, while we are waiting for the adjustments in the EU laws. These internationally agreed principles should remain the target on the horizon for companies.

Key Takeaways

The omnibus simplification package proposes to bring significant change to the current sustainability due diligence and reporting legislation. Its evolution during the legislative process is highly unpredictable.

However, no matter what the final version of the omnibus looks like, companies can use this time to critically assess their plans for the preparation for compliance and prioritise the most essential steps that make sense both from a strategic, risk management and compliance perspective.

Ohana can support you on this prioritisation journey and in advocating for the omnibus and supply chain due diligence laws that are well-aligned, coherent and practical and lead to tackling human rights violations and environmental impacts and risks in global supply chains.

Want someone with deep experience and connections in the EU to help guide your sustainability strategy? Get in touch!

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