Omnibus I Proposal and corporate due diligence: an update

Sustanibility and corporate due diligence

In our ninth post covering Directive (EU) 2024/1760 on corporate sustainability due diligence (“CS3D”), we want to shed some light on the status of the CS3D’s revision process. We also reflect on how to navigate in the context of the uncertainty generated by the Omnibus I Proposal under which a process has been started to revise the basic European regulations on corporate governance of sustainability risks.

Access previous publications in this series here:

Post | The CS3D in perspective

Post | Who does the CS3D affect?

Post | Legal interests protected by the CS3D

Post | Risk-based approach

Post | The Shell case and its potential implications for corporate due diligence

Post | Obligations to end adverse impacts and to provide remediation beyond financial compensation

Post | Due diligence in the chain of activities: a contractual perspective

Post | Omnibus I and impact on CS3D

Introduction

On February 26, the European Commission (the “Commission”) approved the first proposal (the “Omnibus I Proposal” or the “Proposal”) as part of its regulatory package of simplification measures included in its work schedule for the first quarter of 2025. The Omnibus I Proposal is aimed at simplifying corporate sustainability reporting and due diligence (as well as reviewing the requirements of the Carbon Border Adjustment Mechanism). Click here for more details: The EU Competitiveness Compass and the first omnibus proposals).

In our previous Post | Omnibus I and impact on CS3D we reflected on the main amendments of the CS3D included in the Omnibus I Proposal. In today’s post, we will review the status of the legislative process and reflect on what companies should do during this period of regulatory suspension and revision.

Omnibus I Proposal’s legislative process: overview

 At the start of July 2025, we knew the following:

• Temporary suspension of CS3D: Under the “Stop-the-Clock” Directive (2025/794/EU) published on April 16, 2025, the period for transposing the CS3D was postponed one year (until July 2027) and the deadline for its application was also postponed one year (until July 2028) for the first wave of companies affected (see: Approval of “Stop-the-Clock” Directive: impact on business). The main objective of this suspension is to give Member States and companies additional margin to adapt to the new standards of conduct and to the sustainability due diligence requirements.
  
  The transposition deadline for the “Stop-the-Clock” Directive—which also delays the corporate sustainability reporting obligations of Directive CSRD (2022/2464/EU)—ends on December 31, 2025. France has already completed the transposition. Other European countries, which have also incorporated the CSRD within the time frame, have started internal processes for transposing the “Stop-the-Clock” Directive. Spain has not started yet; however, this is not so urgent considering that the CSRD has not even been transposed into our legal system yet. Read this Post | What to do in the case of a delay of the CSRD’s incorporation?.

• Processing through ordinary legislative process: Unlike the “Stop-the-Clock” Directive, which was processed through the urgent process, the other regulatory proposals included in the Ominibus I Proposal follow the ordinary process with a tentative schedule that would lead to its debate and voting at the European Parliament in autumn of this year. The Proposal has been debated at the Council of the European Union, and a final version of the commitment positions arising from the works of the Committee of Permanent Representatives or “COREPER” has been delivered. Parliament will start its debate in mid July.

We are also aware of the existence of diverse positions regarding the Omnibus I Proposal—including regarding regulation of the corporate due diligence standard involving human rights and the environment established in the CS3D—, both of the Member States and of the European institutions (for example, see the opinion of the European Central Bank). An this relates to both the substantive elements of the Proposal and to the legislative process started by the Commission. In relation to the later, we highlight the inquiry opened by the European Ombudswoman concerning how the Commission prepared the Omnibus I Proposal, and the report issued by the Centre for European Policy Studies (CEPS).

Concluding thoughts

The objective of the Omnibus I Proposal is simplification of the corporate sustainability reporting and due diligence requirements, by reducing the administrative burden and promoting companies’ competitiveness.  

This objective  is to be inserted within the reason for (ratio legis) the CS3D, which is no other than to protect and respect human rights.

The current global context and the complexity of the revision process generate uncertainty. While simplification could favour business’ competitiveness, there is also a perception of backward movement, given that companies had already started to prepare and, in many cases, made considerable progress to comply with the legal framework defined by these regulations, including the CS3D. This uncertainty is even greater in those countries that, since July 2024, were already defaulting on their obligations to transpose the CSRD, which is the case of Spain.

In this particular scenario, is seems legitimate to ask oneself “and what now?”. Below we reflect on this in an effort to provide answers:

• Risks exist regardless of whether they are regulated by the lawmaker: the existence, in own operations or in those of the value chain, of child or forced labor, of risks of the appropriation of land from indigenous peoples, or of serious impacts on the environment or on natural resources that have or can have adverse effects on human rights, are factual situations that will not disappear with the suspension or revision of the regulations establishing a standard for their management.
• The risk-based approach inherent to the responsible management of the business activity shows the reliability of companies and their managers. Knowing the value chain of the business activity makes it possible to manage risks, whether of external (adverse impacts or effects) or internal nature (operational and financial).
• Neither the disclosure—obligatory or voluntary—of information on sustainability nor the adherence—contractual or voluntary—to soft law standards of conduct and codes is legally innocuous. At the least, they create legitimate expectations for internal stakeholders (shareholders and employees) and external stakeholders (investors, clients and civil society) to which it will be necessary to provide reliable answers to avoid reputational risks, greenwashing and social washing, and consequently, the lack of information affecting informed decision-making and the fair functioning of competition on the market.

While the legislative process for revising the CS3D—and its sisters, the sustainability reporting regulations—continues, companies’ efforts and investments to build and improve their diligent systems for managing the risks of adverse effects on human rights and on the environment seem to be prudent and responsible. Also, they have the international standards framework to continue to make progress; at the end of the day, the CS3D has drawn sources from these international standards. 

Read more about this in our next post.