EU omnibus proposal: why transparency should remain at the heart of your sustainability strategy

The European Union’s proposed ‘omnibus’ legislation, published Wednesday by the EU Commission after much anticipation, has stirred controversy over its potential impact on businesses and sustainability efforts. This regulatory package, set to affect the EU’s Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), Carbon Border Adjustment Mechanism (CBAM), and EU Taxonomy, aims to streamline reporting requirements and reduce administrative burdens, according to the European Commission. While some organisations welcome the simplification and reduced reporting burdens, others argue that the amendments support a ‘deregulation agenda.’

Despite ongoing debates about the potential implications, organisations must refocus on what should remain central to any sustainable and resilient business: effective risk management and transparency. Regardless of regulatory revisions or reductions, supply chain due diligence is crucial for businesses striving to drive positive impact and avoid reputational damage in a time when human rights and environmental impact are under intense public scrutiny.

The laws impacted: CSRD, CSDDD, CBAM and EU Taxonomy

The key legislative frameworks at the core of the omnibus package were implemented by the EU to drive sustainability and achieve climate targets made under the European Green Deal. While interconnected, these frameworks have introduced complexity, which the omnibus legislation seeks to simplify.

Key changes for companies under the proposed omnibus legislation

While the proposed legislation still needs to pass through further approval, meaning further amendments could be made, the directive published on Wednesday demonstrates key changes to the CSRD and CSDDD, including application scope, changes in deadlines, harmonising requirements for member states and other key amendments.

What’s next?

The omnibus will pass through Parliament and Council for consideration and will only enter into force once an agreement is reached on the proposals and after publication in the EU Official Journal.

The case for continuing supply chain transparency

Prioritising supply chain transparency, even in the face of evolving regulatory changes, is crucial for businesses seeking to ensure resilience and safeguard against labour malpractice and environmental issues. Amid media scrutiny and frequent headlines spotlighting labour investigations involving household brand names and retailers, maintaining a transparent supply chain becomes a cornerstone of ethical business practices.

Transparency not only helps in identifying and mitigating unethical practices but also fosters trust with consumers, investors and partners. As human rights risks and environmental risks increase among key sourcing countries, according to supply chain risk data in EiQ, businesses must prioritise quality, robust data and centralising this data to ensure proactive risk mitigation and ongoing monitoring. While the proposed regulatory changes may reduce reporting scopes, implementing comprehensive ESG data systems is still vital to ensure effective data management, which investors and other key stakeholders will still demand in sustainability disclosures.

How businesses can navigate the turbulent regulatory environment

We support businesses in implementing credible, risk-based ESG strategies that go beyond compliance. Strong due diligence is about making a real impact, not just meeting obligations. For more on our recommendations for improving your sustainability strategy in response to regulatory changes, read our article here: ESG Due Diligence: A Strategic Advantage, Not Just a Requirement | LRQA