CSRD and CSDDD: What’s in the new Omnibus proposal to be voted on next week?

After months of debate, Members of the European Parliament have agreed to vote on an amended Omnibus proposal that drastically pares down both CSRD and CSDDD.

A deal was struck late on Wednesday (October 8) after the European People’s Party (EPP) proposed two options to put to a vote. One was aligned with far-right demands, and completely removed the obligation to adopt a climate transition plan from CSDDD and applied CSRD to companies with 1,750 employees and €450 million in turnover.

The second option was more aligned with centrist priorities, maintaining certain transition plan obligations in CSDDD and the threshold of application of CSRD at 1,000 employees and €450 million in turnover.

Neither option was deemed strong enough by the left and green deal supporters, but faced with the threat of an alignment with the far right, centrist and socialist parties agreed to vote on the second option. Lare Wolters, who led Omnibus negotiations on behalf of socialists, resigned from her lead negotiator position in protest.

The text will now be voted on in the European Parliament next week, and while the Greens have already announced they will oppose it, it is likely to be approved, with the EPP and centrist groups forming a majority.

CSRD scope reduced by 90%

With the new threshold of 1,000 employees and €450 million in turnover, the scope of the Corporate Sustainability Reporting Directive (CSRD) has been reduced by more than 90% compared to the original law – which applied to those with 250 employees and €40 million or more in turnover.

This is aligned with the European Commission’s original proposal and means only around 5,000 companies will be subjected to CSRD compliance – instead of the original 50,000. Experts have pointed out that this is even lower than the scope of the Non Financial Reporting Directive (NFRD), which CSRD came to replace. NFRD applied to public-interest entities such as listed companies, banks, and insurers with more than 500 employees.

“This is a global trend and I believe a course correction from taking good ideas too far,” commented Al Iannuzzi, Vice President of Sustainability at Estée Lauder Companies. “Eventually, reality sets in. This is a critical turning point in the EU’s approach to corporate sustainability. While simplification and competitiveness are valid goals, the balance between regulatory burden and climate & human rights accountability will define Europe’s leadership on sustainable business for years to come.”

CSDDD: No civil liability, transition plans maintained

The compromise also raises the threshold for the application of the Corporate Sustainability Due Diligence Directive (CSDDD) to companies with 5,000+ employees and €1.5 billion in turnover: far higher than the law that was originally approved in the European Parliament last year (1,000 employees and €450 million in turnover) and even than the EPP’s first draft proposal (3,000 employees). But it is aligned with the European Council’s position.

It’s estimated that with this threshold, CSDDD will only apply to around 997 companies.

In the new proposal, this scope is also applied to the so-called ‘value chain cap’, meaning that CSDDD-compliant companies could only request sustainability information from their very large suppliers.

The requirement to adopt a climate transition plan is maintained, but companies would no longer be liable for environmental or human rights violations in their supply chains. By removing civil liability and the fines of up to 5% of turnover included in the original text, the new draft effectively renders CSDDD ‘toothless’.

For Andreas Rasche, Professor and Dean at the Copenhagen Business School, any deal reduces uncertainty for companies, but “the final outcome feels less like consensus and more like capitulation”. 

“The 5,000 employee and €1.5bn cut on CSDDD is unacceptable - this makes due diligence only relevant to a few very large companies, and even these very few will face no common civil liability regime (all three institutions agree on this). This deal may bring closure - but at a very high cost for sustainability and for the credibility of the "von der Leyen majority" in the Parliament,” he added.