After months of opaque process and political uncertainty, the European Commission finally brought forward its proposal to amend key EU sustainability laws through the so-called omnibus directive. What this proposal claims to do is “simplify” key legislation to avoid unnecessary burden for businesses – both for those that will need to comply and those that will need to engage with those companies.
However, already there have been cries of de-regulation from those who have worked for more than five years to bring these rules into force and who are baulking at seemingly knee-jerk changes to the previously agreed text.
While the political messaging has been that these changes are intended to boost EU competitiveness, there is a more fundamental question that needs to be examined, namely: what is the potential of these changes, if they are ultimately agreed, on the development and advancement of global norms on conducting business in a responsible and sustainable manner?
Since 2011, the UN Guiding Principles on Business and Human Rights (UNGPs), along with the subsequent OECD Guidelines for Multinational Enterprises, have provided the backbone of international standards for responsible business conduct. These frameworks have laid out the clear expectation that businesses should undertake due diligence beyond their own operations to identify and mitigate risks to people and planet throughout their value chains.
Likewise, the Global Reporting Initiative has been advancing sustainability disclosure standards towards impact reporting, shifting from primarily reporting how sustainability issues affect the company to the social and environmental impacts of a company’s activities, otherwise known as double materiality.
This has spurred the development of standard setters such as the European Financial Reporting Advisory Group and the International Sustainability Standards Board (ISSB). This has seen corporate reporting as a critical tool for companies looking to meet due diligence and sustainability obligations under established global norms going mainstream.
Watering down standards will shift the global baseline
The EU is a major driver of global economic activity and whatever it does creates ripples that travel throughout global supply chains. Both the EU’s corporate sustainability due diligence directive (CSDDD) and corporate sustainability reporting directive (CSRD) were intended to accelerate sustainability business activity.
However, rolling back on an agreed approach risks the EU ripple effect disrupting the global landscape instead of providing a pathway towards greater convergence.
Looking first at the CSDDD, this law embeds human rights and environmental due diligence into hard law, effectively operationalising the UNGP and OECD standards. In fact the legislation borrows heavily from the OECD’s due diligence guidance, aligning in structure and substance with its six-step, risk-based approach.
This alignment is crucial as it means the CSDDD does not re-invent the wheel. In fact, for those companies already engaging with OECD-aligned processes – such as those under sector-specific guidance in garment manufacture, agriculture or extractive industries – will find themselves better prepared to meet the new EU requirements.
The CSDDD also reinforces the growing consensus that due diligence is not a one-off compliance exercise, but a continuous, proactive process of engagement with real-world risks, in particular those that have the most severe impacts for affected stakeholders.
However, the omnibus proposals risk watering down the regulatory baseline that the CSDDD was attempting to create and could in fact lower the global bar below that previously set by international standards. This could mean a revised EU law will undermine the internationally agreed standard for what is meaningful due diligence processes and what is considered impactful stakeholder engagement. As a result, it could create a tiered system of due diligence that could shatter the international framework.
For the corporate reporting landscape under the CSRD, there is a slight reverse where in fact the EU is taking a lead on mainstreaming impact reporting standards through the double materiality assessment. In this case, there is a need to preserve the current EU approach in order to raise the global bar and to add to the development of the ISSB standards so companies recognise that effective impact management needs impact reporting.
Setting the bar for global standards
The EU’s directives have set ambitious benchmarks for corporate sustainability and due diligence. Their influence extends beyond EU borders, prompting significant regulatory developments for example in south-east Asia and China.
China has recently introduced its sustainability disclosure standards, aiming to harmonise with international frameworks like the ISSB and the EU’s CSRD. Notably, the standards adopts the double materiality principle, reflecting the EU’s influence. This move signifies the growing global commitment to integrating global sustainability norms into its regulatory landscape.
Moreover, data on the uptake of impact reporting measures by companies shows that Asian companies are performing on a par with their European peers. This demonstrates the need for the EU to maintain global standards and not dip below as a result of the omnibus.
Likewise, Thailand and Malaysia are both in the process of introducing human rights due diligence legislation mirroring efforts made by the CSDDD, and in both cases they are designed with the aim of interacting with EU developments.
But why is aligning with international standards so important? Because it can bring greater predictability and legal certainty to responsible business expectations and for both companies and investors, in particular long-term institutional investors, this is critical. In the longer term, this could pave the way for more stable and sustainable investment environments, particularly in emerging markets, where legal certainty and transparent supply chains are key enablers of growth.
Until now, the sustainability risk landscape has been marked by fragmentation, ambiguity and voluntary pledges. Investors have struggled to compare performance or assess systemic risks when underlying data and standards vary so widely. By codifying due diligence duties, the EU provides a clearer benchmark for what constitutes good corporate conduct. This allows investors to better assess and price sustainability risks and rewards. It also helps shift the focus from ESG “box-ticking” to genuine risk management and impact.
Listen to the Sustainability Omnibus Podcast, a limited series exploring the complex nuances of the EU simplification agenda on sustainability reporting.
This page was last updated April 25, 2025
Written by
Richard Gardiner is EU public policy lead at the World Benchmarking Alliance, tracking and monitoring sustainability policy developments, in particular on corporate accountability and furthering corporate transparency. Previously, he worked for European stock exchanges where he focused on market transparency and integrity. He has also worked at Global Witness, campaigning for binding rules on supply chain due diligence for multinational enterprises.
