EU Omnibus: Challenges and Opportunities of the Parliament’s Proposed Changes to the CSDDD

Key Points

• Recently proposed Parliamentary revisions to the EU CSDDD (Omnibus I) mean that the CSDDD’s scope may significantly shrink, applying only to companies with at least 5,000 employees and €1.5 billion in turnover, leaving only about 1,600 firms covered.
• The proposed changes come as the impacts of climate change reach a tipping point and human rights harms worsen. Governments are warning citizens to prepare for at least 2°C of global warming by 2050, while the UN highlights rising modern slavery due to displacement linked to climate change and conflict.
• Regardless of the final legislative outcome, CSDDD presents an opportunity for business leaders, as human rights and environmental due diligence is as much about creating business value and innovation as it is about mitigating risk.

On Monday, October 13, the European Parliament’s Committee on Legal Affairs (JURI) voted in favor of the Omnibus I revision of the Corporate Sustainability Due Diligence Directive (CSDDD), approving its position on a series of changes to sustainability due diligence and reporting for companies.

While the vote marks another step back from the CSDDD’s original ambition, the text reaffirms broad political consensus to move forward with the law and, importantly, reintroduces risk-based due diligence across the value chain, in line with the UN Guiding Principles on Business and Human Rights (UNGPs) and OECD Guidelines for Multinational Enterprises.

The timing is striking. The same day, 160 scientists from across 23 countries released a landmark report warning that the Earth has crossed its first climate tipping point. The report found that unless global warming is reduced to 1.2°C “as fast as possible,” coral reefs—home to a quarter of all marine species—will disappear at any meaningful scale.

What Changed in the CSDDD

The CSDDD aims to ensure that companies identify, prevent, mitigate, and account for adverse impacts on internationally recognized human rights and the environment throughout their own operations, subsidiaries, and chain of activities, and require them to implement a climate transition plan consistent with the Paris Agreement.

However, under the JURI Committee’s compromise text—which also impacts aspects of the Corporate Sustainability Reporting Directive (CSRD)—the Directive’s ambition and reach are significantly curtailed, with several key changes that merit close business attention:

• Severely reduced scope: The CSDDD would only apply to companies with at least 5,000 employees and €1.5 billion in turnover, or around 1,600 firms.
• Retention of risk-based due diligence: The text reintroduces a risk-based approach that allows companies to focus on the most severe and likely impacts across their full chain of activities, not only those within their direct line of sight.
• Reduced scope under CSRD: Effective due diligence depends on the availability of quality data on corporate performance and real-world impacts. However, revisions to the CSRD dramatically reduce the number of companies in scope—roughly 10 percent of the original threshold—which will result in a commensurate reduction in the number of companies collecting and reporting quality data, thereby undercutting effective due diligence efforts.
• Value chain cap: Companies would be limited in requesting information from suppliers with fewer than 5,000 employees, undermining engagement with smaller partners and weakening information flows needed for responsible value chain management.
• Fragmented civil liability: Rather than a unified EU regime, liability will remain national, leaving companies to navigate 27 different legal systems.
• Climate action weakened: Companies would only be required to make “reasonable efforts” to align their transition plans with the Paris Agreement, rather than to implement such plans, weakening the uptake of credible transition plans that deliver valuable insight for company planning and urgently needed decarbonization.
• Monitoring: Companies must assess the effectiveness of due diligence measures at least every four years (less frequently than the 12 months in the law).
• Future Guidance: The European Commission will issue implementation guidance by July 2026, though it remains unclear whether this will clarify the interaction between the CSDDD, CSRD, and other EU regulations.

Paradoxically, these changes disadvantage the few large companies that remain covered. A legal obligation that applies less widely and is interpreted differently across geographies creates more complexity and an uneven playing field.

Yet, this also presents an opportunity for leadership. The companies best equipped to comply—large, multinational, and with significant leverage—are precisely those with the capacity to shape markets, demonstrate best practice, and model what a rights-respecting, low carbon, resilient, and nature-positive economy looks like.

From Risk Management to Value Creation

For the companies left out of scope, the Omnibus revision may reduce regulatory burden, but it should not be seen as a rollback of sustainability expectations, or of the value of conducting effective due diligence of business partners. Instead, it offers a temporary reprieve from certain requirements and an opportunity to strengthen internal human rights and environmental due diligence systems. The CSDDD (and CSRD) will likely define the minimum benchmark for what “good” sustainability practice looks like, and scrutiny from investors, civil society, and regulators will remain.

At the same time, many companies already recognize not only that delivering on sustainability outcomes enhances economic, social, and environmental well-being, but also the ways that robust due diligence measures, such as the payment of living wages and proactive efforts to bridge living incomes, can be a source of innovation, resilience, and value creation.

How Companies Can Respond

Whatever the final legislative outcome, there are a variety of activities companies should consider to better position them to drive long-term business value, mitigate risks, achieve sustainability targets, navigate complexity, and build resilience:
 

• Adopt a robust risk-based due diligence approach covering both adverse human rights and environmental impacts in line with recognized international frameworks.
• Conduct a salience assessment to identify actual and potential adverse impacts on human rights and the environment (including climate and nature), prioritizing the most severe and likely impacts for prevention, mitigation, remediation, and disclosure.
• Invest in climate transition plans that enable business model transformation and are grounded in human rights due diligence.
• Strengthen governance, skills, and accountability across functions and levels to embed due diligence and transition planning effectively.
• Proactively engage stakeholders across the value chain, particularly affected workers, communities, consumers, legitimate representatives such as trade unions, and experts in civil society and national human rights and environmental institutions to identify risks and co-create solutions.
• Ensure regulatory coherence by understanding how the CSDDD interacts with other EU-wide sustainability regulations (e.g., EU Deforestation Regulation, Forced Labour Ban, Batteries Regulation, Conflict Minerals Regulation, and EU Taxonomy). Treat the CSDDD as a due diligence “umbrella” to align and streamline internal compliance and management systems.
• Prepare for evolving frameworks by developing integrated due diligence programs that reflect international standards, credible business frameworks, and the broader regulatory landscape. This includes recognizing and addressing real or perceived gaps in alignment across standards and business frameworks.

What Happens Next?

The proposal now moves to the European Parliament’s plenary, where a vote in support is expected before heading into Trilogue negotiations between the EU Parliament, Council, and Commission. The institutions must come to an agreement on a harmonized version of the text before it can be adopted and take effect. As President of the EU Council, Denmark is eager to close the file on time, with plans to wrap up negotiations by December 8 and finalize the deal by the end of the year. 

While the legislative process has shifted, the direction of travel remains unchanged: toward greater accountability, resilience, and strategic integration of human rights, climate, and nature considerations in business conduct.

Companies in scope of other laws, such as the EU Deforestation Regulation and the forthcoming Forced Labor Ban, will still need to conduct thorough investigations of their value chains, including in-depth requests for information. These de facto due diligence obligations will be best met through an effective risk-based approach aligned with the UNGPs and OECD Guidelines.

Businesses that move early—embedding respect for people, climate, and nature into governance, strategy, and operations—will be best positioned to meet investor and stakeholder expectations and adapt to future regulation.

Through its work, BSR supports companies in building this resilience, helping them turn due diligence from international standards and legal requirements into a driver of long-term value, trust, and impact.

This article was originally published at the BSR website "Sustainability Insights" and is written by Paloma Muñoz Quick (Director, Human Rights Standards) and Taylor Hannegan (Manager, Human Rights and Collaborative Initiatives) at BSR.