EU corporate sustainability laws dealt final blow as ‘Omnibus’ package gets green light

The EU’s controversial ‘sustainability omnibus’ package, which radically reduces the scope and power of flagship laws designed to hold companies accountable for their environmental and social impacts, received final approval on Tuesday.

The European Parliament voted in favour of a substantially amended text following final negotiations between the bloc’s institutions over the past four weeks.

The package affects two EU corporate sustainability disclosure directives that had been lauded by proponents of corporate accountability when first adopted.

“Today’s vote is a betrayal of people and communities suffering from corporate abuse around the world,” said Nele Meyer, director of the European Coalition for Corporate Justice, a campaign group backing stronger laws for corporate accountability. 

Today’s vote is a betrayal of people and communities suffering from corporate abuse

The omnibus package is part of the EU Commission’s drive to simplify regulations for businesses that it alleges stifles competitiveness and innovation in the union.

The two directives concerned are the Corporate Sustainability Reporting Directive (CSRD), which requires companies to report on their own social and environmental impacts, and the Corporate Sustainability Due Diligence Directive (CSDDD), which mandates businesses to assess, and take action against, harmful impacts in their supply chains. 

In addition to limiting sustainability and supply chain reporting requirements to the largest companies, it entirely scraps a requirement for companies to adopt a climate transition plan under the CSDDD. 

It also removes an EU-wide civil liability provision for victims to hold companies accountable for harm created in their supply chains.

Meyer (pictured) argued EU lawmakers have given in to lobbying by large companies that oppose sustainability regulation. She said: “By cutting a key binding duty that would have compelled the biggest emitters to lower their emissions, EU lawmakers have handed powerful fossil fuel interests exactly what they demanded. 

“Under the banner of cutting ‘red tape’, vital protections have been dismantled, this decision leaves people and communities more exposed to harm.”

Both laws amended by the sustainability omnibus package are directives, meaning that they need to be transposed into the national laws of EU member states.

A quest for competitiveness

The EU Commission in February submitted to the Parliament a so-called omnibus package of directives that it said would simplify rules that require companies to disclose their impact on society and the planet, which allegedly created a burden for businesses.

The initial package came under fire from proponents of corporate sustainability as it planned to substantially reduce the number of businesses required to report on their social and environmental impact, soften reporting requirements and delay the implementation of new rules.

Despite hopes that the Commission’s proposal could be softened, negotiations between the different institutions involved have only further weakened the rules, gaining support from far-right parties in Parliament.

• Read more: EU lawmakers accused of pushing ‘Trumpist agenda’ as they vote to curb sustainability laws with far-right support

Centre-right MEP Jörgen Warborn, rapporteur on simplified sustainability reporting and due diligence requirements, who led the negotiations on the text, said: “Parliament has listened to the concerns expressed by job creators across Europe. 

“Backed by a broad majority, today’s vote delivers historic cost reductions while keeping Europe’s sustainability goals on track. This is an important first step in the ongoing efforts to simplify EU rules.”

This is an important first step in the ongoing efforts to simplify EU rules

Concerns are rising that the EU is moving away from its broader “Green Deal” agenda (a series of policy measures aiming to make the bloc carbon neutral by 2050) as the political balance of elected lawmakers shifted to the right in the 2024 European elections. 

But a proposed revision of its regulation on sustainability-related disclosures for the financial sector brought some hope to the impact community, as it, for the first time, called for a “recognition” of impact investing among moves to otherwise broadly simplify the rules.

Campaigners remain cautious however, as the proposal is only at the beginning of the EU legislative process, meaning it is likely to be substantially amended during negotiations in the European Parliament and the Council of ministers – so there is a risk the mention of impact investing could be cut.

• Read more: Impact Europe, GSG Impact and allies urge EU legislators to back Commission’s SFDR recognition of impact investing

Top image: Rapporteur Jörgen Warborn and Danish minister for industry, business and financial affairs Morten Bødskov hold a press conference on the final agreement between the EU’s institutions on the omnibus package, which was voted through yesterday.