EU must reject Omnibus amendments that weaken crucial Green Deal laws

Proposed amendments significantly weaken groundbreaking regulations intended to make companies identify and address the environmental and social impacts of their activities.

By Mary Frampton

Communications Lead for Trase at Global Canopy

On 26 February the European Commission announced a proposed package of measures with the stated aim of simplifying and streamlining rules on sustainable finance reporting, sustainability due diligence and taxonomy. The changes relate to laws introduced under the EU’s Green Deal including the Corporate Sustainability Reporting Directive (CSRD), the Taxonomy Regulation and the Corporate Sustainability Due Diligence Directive (CSDDD). 

The aim of these laws when introduced was to improve transparency on sustainability reporting, guide sustainable investment, mandate responsible business practices, introduce accountability for corporations abusing human rights and damaging the environment, and ensure access to justice for survivors. The amendments proposed under the EU Omnibus announcement would serve to significantly weaken these laws, reducing their ability to achieve what they set out to do.

Far fewer companies with sustainability reporting requirements

The aim of the CSRD is to improve transparency and accountability of companies’ environmental and social impacts in order to enable stakeholders to evaluate their sustainability performance. The EU Taxonomy is a classification system that defines criteria for economic activities that are aligned with net zero and environmental goals, so that financial and non-financial companies can share a common definition of which activities are environmentally sustainable. 

Pre-Omnibus the CSRD required both large companies and listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment. However the new proposals would remove 80% of companies from the scope so that it would only focus on the largest, and reporting requirements would be postponed for two years (until 2028). The number of companies required to disclose how well their activities align with the EU Taxonomy would also be greatly reduced. 

Scope of due diligence assessments cut short

The aim of the CSDDD is to ensure that large companies identify and address adverse human rights and environmental impacts of their actions inside and outside Europe. Pre-Omnibus the regulation required large companies to identify, prevent, mitigate and account for negative human rights and environmental impacts within their operations, subsidiaries and value chain. Companies could also be held liable for the damage caused and would have to provide full compensation. 

Under the new proposals, companies would only be required to undertake systematic due diligence on direct business partners, the frequency of periodic assessments and monitoring of partners would be reduced from annual to 5 years, and the amount of information that companies can request as part of the value chain mapping by large companies would be limited. Companies would no longer be required to cut ties with partners who continue to perpetrate severe human rights and environmental abuses, and civil liability would also no longer be mandatory. The application of requirements would also be postponed by 1 year (to 26 July 2028).

In addition, rather than requiring companies to both adopt and put into effect Climate Transition Plans in line with the Paris agreement on climate change, under the new rules, actually putting plans into effect would no longer be mandatory. 

EU must reject amendments which slash effectiveness

Many voices in the NGO community (including Client Earth and the European Coalition for Corporate Justice) argue that the changes, rather than just simplification, amount to significant deregulation which would dismantle corporate accountability. There is particular concern that the proposals remove the teeth of the CSDDD by restricting due diligence only to direct suppliers, weakening enforceable obligations around labour rights, and reducing obligations relating to climate transition plans. 

“The world is watching Europe for guidance and stability. The EU has an opportunity to remain steadfast in its green ambitions and human rights commitments by protecting these essential sustainability laws and recognizing that promoting sustainable business practices will ultimately foster a more stable environment that will give the EU an edge now and in the long run.”

From the joint statement signed by Global Canopy and over 360 other organisations

The Council of the EU and the European Parliament now have the opportunity to review and debate the amendments put forward by the Commission. The trilogue, comprising the Commission, Council and Parliament must all agree to any changes before they can be put into law. Global Canopy has joined more than 360 other organisations in calling on the EU to reject changes to the due diligence regulation which would significantly reduce its effectiveness. 

Restricting due diligence to direct suppliers leaves significant impacts unaddressed

Companies must address environmental and human rights impacts within their entire value chain in order to achieve sustainable trade. Limiting due diligence to only their closest business partners will not provide the protection needed. For instance, Trase analysis highlights that in the case of forest risk commodities, large volumes are bought by traders indirectly through local brokers or other intermediaries, rather than directly from farmers. Therefore unless companies are required to act on their entire value chain, they won’t tackle a major proportion of the  environmental and social impacts linked to their sourcing.  

Voluntary action on climate impacts won’t cut it

If climate targets are to be achieved, companies and financial institutions must set out commitments to reduce emissions and take urgent and tangible action to achieve them. Relying on voluntary action won’t drive the change needed. Removing from the CSDDD the requirement for companies to put climate transition plans into effect reduces the drive and urgency for material action to curb emissions, putting our planet at risk. 

Robust and enforceable regulation is vital

Corporate transparency and accountability has a key role to play in the transition to more sustainable and equitable supply chains. While some revision to these Green Deal regulations may be necessary in order to reduce complexity and confusion, the EU must not accept amendments which backtrack on their original aims. Robust and enforceable regulation is required to ensure the protection of our environment and human rights.