Omnibus Proposal Undermines Corporate Accountability and Could Reverse Years of Progress on Sustainability, Warns Andreas Rasche

In light of the recent Omnibus Proposal, what advice do you have for small and large companies?

For larger companies, reporting requirements will largely remain unchanged as they stay within scope. However, they must assess what data they can request from smaller companies under the new omnibus proposal, which introduces a "value chain cap" limiting such demands.

On the due diligence side, the proposal restricts assessments to first-tier suppliers. This presents challenges, as supply chains are vast, and major issues often arise beyond the first tier. This restriction could hinder efforts to address labour rights violations in global supply chains.

However, the proposal allows an exception: if "plausible information" suggests a rights violation further down the supply chain, companies can investigate beyond the first tier. Still, the broader issue remains—assessments are limited to the first tier and the review of the adequacy of the due diligence set-up has been moved from one year to five years. This infrequent review undermines the directive’s effectiveness, as meaningful supplier engagement requires ongoing discussions and multiple assessments.

For smaller companies, the key is to wait until the proposal is final to determine their scope. If they fall outside it, they should ask: Why do we report in the first place?

This question provides valuable insights. Understanding whether reporting helps manage risks, allocate capital, or enhance value chain visibility clarifies its importance beyond regulatory compliance. Even if not mandatory, reporting may still serve a strategic purpose.

Does the current Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) place a heavy reporting burden on companies currently?

I think it’s quite contextual—what you consider a burden. Reporting does come with compliance costs, no doubt about that. It’s not free. However, these costs should be viewed in context. Reporting isn’t just an expense; it also serves as a management framework that adds value to the company, if it is conducted in the right way. Therefore, it’s essential to consider both the costs and the benefits rather than focusing solely on short-term compliance expenses, which would be too short-sighted.

You have previously argued how the CSRD, CSDDD, Sustainable Finance Disclosure Regulation (SFDR), and the EU taxonomy should be viewed as an interconnected system. Can you expand on that notion further? 

The EU designed these directives as part of a broader system rather than standalone regulations. However, they are not perfectly aligned due to the parallel legislative processes that shaped them. Despite this, they were intended to work together—data from the CSRD interacts with the EU Taxonomy, and information from the CSDDD connects with both the CSRD and the taxonomy. The goal is to avoid redundant reporting by enabling companies to use the same data for multiple purposes.

That said, large companies do have some flexibility in designing their own reporting systems. While they must ensure compliance with legal requirements, they can tailor their frameworks to streamline reporting across different directives, particularly if they fall under the scope of CSDDD, CSRD, and the Taxonomy. This allows for some customization, but within the boundaries of the minimum legal standards.

What business opportunities do companies and the 160 investors representing assets worth 1.6 trillion dollars who opposed the omnibus proposal in a joint statement see in full disclosures?

Investors primarily seek detailed, granular data to make responsible and sustainable investment decisions. To assess companies effectively, they require value chain data from large corporations, as many critical issues—such as climate change, labour rights, and human rights—are deeply embedded within value chains.

Their concern is that the omnibus proposal could reduce data transparency and comparability. A lack of fine-grained ESG data would hinder their ability to conduct accurate assessments, which is why they have advocated for a proportionate approach rather than sweeping deregulation.

While investors acknowledge that the system can be improved, the current proposal leans more towards deregulation than simplification. If implemented, it would undermine corporate accountability and transparency by shifting the focus solely to large companies. Smaller companies would only be encouraged to report voluntarily, meaning many might not, which weakens overall transparency. The CSRD was initially a step toward mainstreaming sustainability reporting, covering around 50,000 companies. However, the current proposal would reduce that number to just 10,000, significantly limiting its impact.

How do you see the discussions on the Omnibus proposal unfold?

To be honest, the path forward looks challenging. The key issue now is whether the centrist parties can come together and find a compromise.

A major concern is that the European People’s Party  (EPP), the centre-right party and the largest bloc in the European Parliament, might align with the far-right on this proposal. Such a move would send entirely the wrong signal. Ultimately, the outcome will depend on how coalitions form within the Parliament and whether a majority emerges from the centre or shifts toward the far-right.

Why are these regulations being reconsidered so quickly, even before they have fully come into effect? Do you see this as primarily driven by political factors, economic reasons, or both?

I think it’s both. You need to look at it from the perspective of the Commission. Right now, the Commission is operating in a political environment where it faces significant pressure from the U.S., particularly in economic terms. At the same time, it must navigate an increasingly uncertain economic landscape.

We had the Draghi report, which pointed out that Europe is not competitive enough, so there is a clear need for action. The Commission also made promises during the election campaign, and now it has to deliver—that’s simply how politics works.

What I find difficult to understand, however, is why sustainability regulations have been singled out for simplification. The CSDDD was only adopted last year and is not yet fully implemented. The CSRD has just begun to be rolled out. We don’t even have data on the potential effects of both directives. Yet, we are already cutting back regulations that have not been tested—mostly due to political opportunism and ideology.

March 2025