BRUSSELS — The European Commission is set to unveil substantial revisions to the European Union’s environmental reporting regulations as part of its initiative to reduce bureaucratic hurdles and stimulate the bloc’s ailing economy, according to leaked sections of an upcoming omnibus legislation draft.
Exemptions for businesses and reduced requirements
This forthcoming legislation represents one of the first major initiatives from the new Commission. It indicates that numerous businesses could be exempt from the stringent corporate sustainability reporting regulations, effectively limiting compliance obligations to only the largest enterprises. The draft suggests a significant easing of requirements that mandate companies to monitor environmental and human rights practices throughout their global supply chains.
“If confirmed, this is reckless,” Maria van der Heide, head of EU policy at NGO ShareAction, stated on Saturday. “Sustainability laws designed to tackle the most pressing crises — climate breakdown, human rights abuses, corporate exploitation — are being crossed out behind closed doors and at record speed. This is not simplification, it’s pure deregulation.”
Details of the omnibus bill
The omnibus bill, anticipated to be presented on February 26, seeks to simplify three key environmental regulations that impact businesses: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy, which defines sustainable investments.
Although the draft does not confirm alterations to the carbon border tax, it proposes significant changes to the due diligence rules, allowing businesses to solely examine their direct suppliers rather than extending their scrutiny further down the supply chain. Additionally, the timeline for implementing the CSRD would be postponed by a year, limiting compliance to the largest companies—those with over 1,000 employees and a turnover of €450 million. Under current regulations, even listed companies with as few as 50 employees and an annual turnover of €8 million would have been subject to these rules starting in 2026.
This shift would align the scopes of the CSRD and CSDDD, a change that businesses and member states have been advocating for. The draft also indicates a possible removal of the “double materiality” principle from the CSRD, which obligates companies to evaluate their environmental impact, rather than just the financial risks posed by climate change.
Once presented, these proposed amendments will need to receive approval from member states in the Council of the EU and from legislators in the European Parliament.
Impact on due diligence and liability
The original due diligence law, enacted in 2024 and set for incremental implementation beginning in 2027, initially required companies to investigate their supply chains thoroughly to identify and address activities that could harm the environment or infringe on human rights. The new proposals would drastically lessen these responsibilities.
Under the revised rules, companies would only need to consider suppliers with whom they have direct business relationships, and the frequency of supplier monitoring would decrease to once every five years instead of annually. This change is expected to significantly alleviate the compliance burden not only for large corporations but also for small and medium-sized enterprises (SMEs) that often bear the brunt of detailed information requests.
Furthermore, companies would no longer be compelled to sever ties with suppliers who fail to improve their practices, and the current EU-wide liability framework is proposed to be abolished. Instead, liability for breaches under the CSDDD would be regulated solely by national laws, thereby reducing litigation risks for companies.
Finally, the draft aims to narrow the definition of “stakeholder,” limiting the range of individuals and communities that businesses must consider during their due diligence processes. The proposed amendments also soften the original requirement for companies to implement climate change transition plans and alter the penalty structure for non-compliance, removing the stipulation that fines be linked to a company’s turnover.