Companies have a responsibility to take social, environmental and human rights issues into account in addition to their economic and financial performance.
Today, undoubtedly, European companies are world-leading in monitoring supply chains’ adherence to human rights and environmental protection. Many Ceemet members already include environmental, social, and corporate governance factors in their ongoing due diligence measures through robust and tested frameworks, such as the UN Guiding Principles on Business and Human Rights and the OECD guidelines, and mandatory regimes, such as the UK and Australian Modern Slavery Acts, the obligations in relation to Conflict Minerals and the EU Non-Financial Reporting Directive.
Given the current geopolitical context of conflicts and trade tensions, and following the Draghi Report and the Budapest Declaration on the New European Competitiveness Deal of the EU Heads of State and Government, who called for a simplification revolution, ensuring a clear, simple and smart regulatory framework for businesses, the European Commission has put forward a simplification agenda. The First Omnibus Package entails a far-reaching simplification in the fields of sustainability reporting, due diligence and taxonomy.
First, the stop-the-clock Directive adopted on 14 April 2025 postponed the application dates of the Corporate Sustainability Reporting Directive (CSRD) and the Directive on Corporate Due Diligence (CS3D). A Delegated Act of 11 July 2025 followed to include also ‘first wave’ companies.
Second, the reporting and due diligence obligations set in the CSRD and CS3D are significantly simplified.
We currently await the publication in the Official Journal of the EU.
The main points of the provisional agreement are:
1. Which companies fall within the scope – transposition date
- For CSRD, companies with more than 1000 employees and a net turnover of more than €450 million must report on their sustainability. Listed SMEs are removed; financial holdings are exempted. There is a transition period for companies that had to start reporting from financial year 2024 (“wave one” companies); they are exempted to report for financial years 2025 and 2026.
- For CS3D, only large companies with more than 5000 employees and a €1.5 billion net turnover must carry out due diligence on their adverse impacts. The transposition deadline is extended to 26 July 2028. Companies will have to comply with the new measures by July 2029.
- However, there is a review clause concerning a possible extension of the scope for both CSRD and CS3D.
2. How to do due diligence
- Risk-based approach: companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur.
- Companies can prioritise assessing the adverse impacts of direct business partners.
- No comprehensive mapping exercise, but instead a more general scoping exercise is required, based on reasonably available information. This will reduce the trickle-down effect of information requests on SMEs.
- The requirement for companies to adopt a transition plan for climate change mitigation has been removed.
3. Civil liability and penalties
- No EU harmonised civil liability regime. Instead, the national liability rules continue to apply.
- However, a review clause is inserted to evaluate the need for an EU harmonised liability scheme.
- As for penalties, there will be a maximum cap of 3% of the company’s net worldwide turnover. The Commission will issue guidelines.