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On 26 February 2025, the eagerly awaited omnibus package on sustainability was published by the European Commission (Commission). This package contains proposals to simplify and postpone the application of CSDDD by way of two amending Directives.
While our recent article covers the proposal to extend the implementation timeline for CSDDD, it primarily focuses on the proposed amendments to the Corporate Sustainability Reporting Directive (CSRD). In this update, we provide an overview of the key amendments proposed to CSDDD. It is important to note that the publication of the proposal is only the start of the EU’s legislative process with amendments likely before the final text is agreed by the European Parliament and Council.
Background
CSDDD entered into force on 25 July 2024 and the deadline for EU member states, including Ireland, to transpose it into national law is 26 July 2026. Currently, CSDDD is due to apply on a phased basis to very large EU and non-EU companies from 26 July 2027, with full application from 26 July 2029.
The main focus of CSDDD is on conducting due diligence on actual and potential human rights and environmental impacts in respect of an in-scope company itself, its subsidiaries, and its direct and indirect business partners throughout its chain of activities. The other key obligation introduced by CSDDD is that in-scope companies adopt and put into effect a transition plan for climate change mitigation which aims to ensure, through best efforts, compatibility of the business model and strategy of the company with the transition to a sustainable economy and with the limiting of global warming to 1.5°C (a Climate Transition Plan).
Key Proposals
Postponing the transposition and application of CSDDD and bringing forward the guidelines’ publication date
The Commission proposes to delay, by one year to 26 July 2027, the deadline for member states to introduce implementing legislation. The proposal also seeks to extend the commencement of the phased application of the requirements introduced by CSDDD to 26 July 2028. The Commission also proposes to adopt general guidelines on the application of CSDDD by July 2026. This would give companies more time to prepare for CSDDD and assist them in doing so by providing best practice guidance on the most cost-efficient implementation methods.
Focusing systematic due diligence requirements on direct business partners
This proposal would limit, as a general rule, the requirement for companies to proactively assess actual or potential adverse impacts in often complex value chains to direct business partners. This requirement would only extend to an indirect business partner in circumstances where the company has plausible information to suggest an adverse impact in respect of that business partner. Having plausible information could mean being aware via media reports or business contacts about problematic activities or incidents.
Limiting the information that large companies may request from SME and SMC business partners for value chain mapping
As part of their value chain mapping exercise, it is proposed to limit the information that large companies can request from their business partners that are categorised as small and medium enterprises (SMEs) or small mid-cap companies (SMCs) to information specified in the voluntary sustainability reporting standards (VSME standards). This limitation would apply unless the company needs additional information to carry out the mapping that could not reasonably be obtained by other means. This proposal, in particular, could significantly reduce the trickle-down impact of CSDDD on SMEs and SMCs in the value chain of larger companies subject to CSDDD.
Reducing the frequency of periodic assessments
Currently, CSDDD requires that in-scope companies assess the adequacy and effectiveness of their due diligence measures annually. It is proposed to reduce the frequency to every five years, with ad hoc assessments where there are reasonable grounds to believe that the measures are no longer adequate or effective or that new risks may arise. The Commission estimates that this proposal could reduce the annual costs related to periodic assessments for companies by up to 80%.
Deferring to national civil liability regimes and removing the requirement regarding representative actions by civil society organisations
The CSDDD provides for a specific, EU-wide liability regime and requires that member states allow for victims of adverse impacts to be represented by trade unions or non-governmental organisations (NGOs). The Commission proposes to remove these provisions (while preserving victims’ right to full compensation) in response to calls from certain stakeholders to defer to national civil liability regimes and to limit access to justice to directly affected victims. The rationale is that the proposed amendments will maintain the requirements for effective access to justice while protecting companies from over-compensation. The proposal would leave national law to define whether its civil liability provisions override otherwise applicable rules of the third country where the harm occurs.
Aligning transition plan requirements with CSRD
With the intention of providing further legal clarity for businesses, it is proposed to amend the language of the provision on climate transition plans to better align with the provisions of CSRD. It is proposed to amend the language to remove reference to a climate transition plan being “put into effect” and replacing this with reference to “implementing actions”. It isn’t clear what the intended practical effect of this proposed amendment is.
Extending the scope of maximum harmonisation
It is proposed to extend maximum harmonisation to more provisions of CSDDD, ensuring consistency of approach in relation to the core due diligence process elements (including the identification duty, obligations to address adverse impacts, and the requirement to have a complaints procedure and notification mechanism). These proposals aim to increase the level playing field across the EU for companies by ensuring less variations in the rules across different member states. This could bring overall compliance cost savings for corporate groups that are active in multiple member states.
Removing review clause regarding financial services and the investment activities of regulated financial undertakings
Under CSDDD, the Commission must submit a report to the European Parliament and Council on the necessity for additional sustainability due diligence obligations tailored to financial undertakings with respect to the provision of financial services and investment activities by 26 July 2026. A proposal has been included to remove this provision, meaning that, unless further amendments are introduced in the future, financial undertakings would not need to consider the impacts of their downstream business partners. However, the Commission retains the power to propose financial sector-specific due diligence rules if and when appropriate.
Key takeaways and next steps
According to the Commission, these proposals would significantly simplify due diligence obligations for the very large companies that are in-scope of CSDDD requirements (approximately 6,000 EU and 900 non-EU companies) and their value chain partners without compromising its core objective. It is estimated that the proposals will bring about cost savings of €320m per annum, as well as substantial one-off cost savings.
The amendments proposed to CSDDD have been submitted to the European Parliament and the Council for their consideration. Initial discussions by the European Parliament indicate that consensus on these proposals may be difficult to achieve.
Our briefing on CSDDD, published in April 2024, sets out details of the existing provisions of CSDDD.
With thanks to Erin Ward for her assistance in the preparation of this article.
For further information on these developments, please contact Jill Shaw, ESG & Sustainability Lead or any other member of the ALG ESG & Sustainability team.
Date published: 26 March 2025
