Navigating the landscape in Business and Human Rights

Over the past few months, the European Union has been reassessing its corporate sustainability legal landscape. In an effort to reduce administrative costs and enhance competitiveness, the European Commission has unveiled the "Omnibus" simplification package, which proposes significant changes to key regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy.

The CSRD, adopted in 2022 and effective from 2024, mandates that companies disclose detailed information on their environmental, social, and governance (ESG) impacts, enhancing transparency in sustainability practices. Complementing this, the CSDDD, adopted in 2024 with implementation expected by 2027, requires companies to identify, prevent, and address adverse human rights and environmental impacts across their global operations and value chains.

This includes both direct and indirect business relationships, covering upstream suppliers of raw materials or manufacturing services, as well as downstream activities like distribution, transport, and storage of products. A distinctive feature of the CSDDD is its extraterritorial reach, applying to both EU and non-EU companies operating within the EU, thus promoting global corporate responsibility.

CSRD and CSDDD Overview

Directive	Adopted	Effective	Key Requirements
CSRD (Corporate Sustainability Reporting Directive)	2022	2024	Mandates companies to disclose detailed information on ESG impacts, enhancing transparency in sustainability practices.
CSDDD (Corporate Sustainability Due Diligence Directive)	2024	2027	Requires companies to identify, prevent, and address adverse human rights and environmental impacts across global operations and value chains.

Proposed Changes

The Omnibus package proposes several changes to these regulations. Specifically, it suggests raising the threshold for mandatory sustainability reporting under the CSRD from 250 to 1,000 employees, potentially exempting many companies currently reporting on human rights. It also includes a proposal to pause (“stop the clock”) reporting obligations for two years, allowing companies additional time to adjust to new requirements. Additionally, the package recommends delaying the CSDDD’s implementation by one year and narrowing the scope of due diligence obligations. Under the proposed changes, companies would focus their due diligence efforts solely on direct (Tier 1) suppliers and business partners - unless a known risk exists further down the supply chain, in which case they must extend their due diligence measures accordingly.

While the EU aims to reduce bureaucratic burdens, these changes could dilute protections for human rights and the environment, leaving smaller companies and indirect suppliers less scrutinised. This, could slow down progress in holding companies accountable for human rights and environmental impacts across global supply chains.

The Omnibus package could shift both the scope and timing

Directive	Original Timeline	Proposed Omnibus Changes
CSRD	Effective from 2024	- Threshold raised to 1,000 employees - Potential two-year “stop the clock” pause for reporting
CSDDD	Effective from 2027	- Delayed by 1 year (to 2028) - Narrower scope of due diligence

So, what now?

As some observers may feel let down by efforts to dilute these directives, it’s important to remember that, regardless of what happens at the EU level, there are established frameworks that can help companies maintain strong human rights and environmental standards. Voluntary guidelines like the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Due Diligence Guidance for Responsible Business Conduct offer internationally recognised principles that can guide companies in fulfilling their human rights responsibilities and implementing effective due diligence, even when legal requirements are less stringent.

Corporate sustainability isn’t just about meeting regulations; it’s an opportunity to drive positive impact. Companies that actively embrace sustainability, ethical business practices, and human rights will be better positioned to thrive in an increasingly conscientious global market. By prioritising transparency, accountability, and responsible strategies, businesses can build trust, attract investment, and drive long-term success. As human rights and corporate responsibility take on greater significance, businesses that lead with these values will be best equipped for the future, regardless of the outcomes of the Omnibus package.

Stay tuned for more insights on Business & Human Rights in our upcoming blog posts.