EU omnibus proposals on sustainability weakens corporate accountability around human rights

In late February, the European Commission suggested relaxing some environmental and corporate sustainability regulations for most European businesses. This omnibus proposal comes after concerns were raised that strict European Union regulations put the region’s businesses at a disadvantage compared to international competitors, especially with deregulation efforts underway in the United States.

Likewise, research has shown that the announcement of an omnibus is part of a broader policy shift aimed at making the EU more industry-friendly by deregulating — an idea that’s heavily influenced by the report on EU competitiveness released by former Italian Prime Minister Mario Draghi.

Proponents of the omnibus package came from some businesses in Germany and France, but the decision was also met with disappointment from environmental and human rights advocates, several EU governments, and some investors. In addition, many businesses supported the goals of the EU’s sustainability due diligence and company reporting rules.

What the omnibus proposal says about reporting & due diligence requirements

The proposed simplification of EU sustainability regulations in the omnibus scales back previously approved obligations on companies to address human rights and environmental concerns as part of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy.

Indeed, some of key elements of the omnibus proposal that may impact the CSDDDD include:

Extending the deadline — The first companies required to report will now have an additional year to comply, with the deadline moving to mid-2028, from mid-2027.

Weakened supply chain requirements — Companies will only be required to apply the rules to their direct suppliers, rather than to all subcontractors and suppliers throughout their entire supply chain. There is an exception for cases in which there is a plausible suggestion of adverse impacts beyond Tier One suppliers. However, this is a departure from the risk-based approach, according to the recent response to the omnibus proposal by the Danish Institute for Human Rights.

Reduced monitoring frequency — Companies will only be required to monitor the effectiveness of the measures taken every five years.

Guidance for companies while omnibus negotiations are underway

Human rights advocates are concerned that the omnibus proposal may convey to businesses that addressing human rights and environmental issues on a global scale are no longer a pressing concern.

While the simplification package is negotiated, it can be tricky for companies to know how to navigate this time of uncertainty. Theresa Quiachon, co-founder of CORE, works with companies on the practical implementation of human rights due diligence. According to Quiachon and her team, as businesses face an uncertain legal landscape with the evolving omnibus proposal, a key question often arises: Should we continue investing in human rights due diligence or wait for clearer guidelines?

The answer, based on practical observations, is clear — those businesses that have already invested significant resources in due diligence processes around human rights should continue those efforts — because stopping now would undermine these investments and destabilize supplier relationships.

In addition, companies that focus solely on compliance — adhering to the minimum legal requirements — risk missing the bigger picture. A risk-based approach allows for a more comprehensive understanding of supply chain vulnerabilities that can help ensure that businesses can better manage potential human rights risks deeper in the supply chain, where violations are often hidden.

Therefore, CORE’s key recommendations for the short term include:

• • • Recognizing human rights due diligence as a core business responsibility and path to long-term resilience: Human rights due diligence is not an optional component of a sustainable business strategy; rather, it is a fundamental requirement for responsible corporate governance. No company should wait for economic reasons to address issues like forced or child labor. Indeed, businesses that engage with these challenges early will be better positioned for long-term stability and societal expectations.
    • Leveraging human rights due diligence as a strategic advantage: Companies should treat their due diligence efforts around human rights as more than a regulatory requirement. In fact, company leaders should view it as a long-term strategy that offers a competitive edge. Businesses already practicing human rights are better prepared for both current and future regulatory requirements across multiple markets. They should continue refining processes, as new empirical data and learning-based guidelines will make implementation more efficient. A purely compliance-driven mindset can leave blind spots, whereas a proactive, risk-based approach ensures more informed and effective decision-making.
    • Ensuring continuity despite limited resources: Many companies face resource constraints and as a result, sustainability activities may be de-prioritized — however, conducting due diligence around human rights is still a requirement for many businesses. While federal laws in the US may not be as extensive as those in Europe, several key regulations and trends are pushing US companies to adopt human rights due diligence practices, including the Uyghur Forced Labor Prevention Act and Section 1502 of the Dodd-Frank Act on conflict minerals. Now is the time for companies to stay the course on human rights risk management, even if only gradual progress is possible. In fact, they need to maintain relationships with suppliers and continue educating internal teams on human rights risks.

The EC’s omnibus proposal to relax corporate sustainability regulations for European businesses has sparked a significant debate, with some businesses supporting the proposed changes while some investors, companies, and human rights advocates express concern about diminished accountability.

To deal with this regulatory uncertainty, companies should continue investing in human rights due diligence as a strategic advantage rather than merely a compliance requirement. They also should recognize it as essential for long-term business resilience and a critical way to meet societal expectations regardless of changing legal frameworks.

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You can find more on this topic in the Thomson Reuters Institute’s Human Rights Crimes Resource Center