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The Omnibus I political agreement announced yesterday broadly eases the sustainability compliance and due diligence burden for businesses under the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), giving much-needed certainty to businesses. It is a significant achievement for the EU’s simplification agenda and ongoing efforts to reduce the regulatory burden. Specifically, the flexibility introduced in terms of the risk-based approach and how companies need to define adverse impacts will alleviate most of the excessive burden that existed under the original CSDDD. The revised transposition timeline of CSDDD to 2029 will also give all parties the necessary time to prepare for implementation.  

However, it appears that EU policymakers did not yet sufficiently tackle how these rules apply to the global activities of companies and groups – for example, by limiting the scope of the CSDDD to only those products and services with a logical link to the EU. This is a missed opportunity with far-reaching consequences that keeps legal uncertainty in place for global firms and their supply chains.  This oversight on extraterritorial impact will make the CSDDD more difficult for policymakers to implement and monitor and risks creating confusing overlap with other jurisdictions’ rules. 

The EU must use the next steps in the policy-making process – including implementing measures, guidance and future reviews – to fix outstanding challenges in both the CSDDD and the CSRD. In particular, clearer rules on when and how EU legislation impacts global business activities would give companies the predictability they need to invest and support sustainability investments. 

While the European Parliament’s decision to return the first simplification package on the CSDDD and the CSRD to plenary introduces further delays for Europe’s sustainability agenda, recent progress in Omnibus I reflects meaningful steps toward a more proportionate framework. Yet major concerns remain unresolved, as set out in our reaction to the report adopted by the JURI Committee. The extraterritorial reach of both directives risks creating conflicting legal obligations for companies with international footprints. This is not only a matter for US-based companies, but for all businesses with international footprints that may be subject to overlapping or conflicting legal obligations in jurisdictions outside the EU. Read more in the recommendations we’ve set out on what remains to be done if the EU wants to make these frameworks effective and workable for all.

The adoption of the Omnibus report by the European Parliament’s Legal Affairs (JURI) Committee is a critical milestone for the EU simplification agenda. This signals the EU’s ongoing efforts to simplify the regulatory landscape and foster a more business-friendly environment, ensuring that legislation remains clear, consistent and practical for companies operating in Europe.

However, key concerns remain. In particular, the issue of extraterritoriality has yet to be adequately addressed. The current provisions risk creating significant legal and operational challenges for companies with global operations and supply chains that extend beyond the EU. This is not only an issue for US-based companies, but for all businesses with international footprints that may be subject to overlapping or conflicting legal obligations in jurisdictions outside the EU.

Moreover, we regret the continued inclusion of transition plans within the Corporate Sustainability Due Diligence Directive (CSDDD) as it creates unnecessary overlap with the Corporate Sustainability Reporting Directive (CSRD) and legal risk. Indeed, the CSRD already defines necessary standards for transition plans.

Policymakers must tackle these remaining issues during the upcoming trilogue negotiations to ensure a balanced, proportionate and globally coherent framework that supports both sustainability and competitiveness.