Assessing the Omnibus Vote and Implications for Corporate Human Rights and Environmental Due Diligence and Reporting

Parliamentary dynamic and timeline

• Speakers described a “three-level drama”: (1) the substance of the legislative file; (2) the shifting political majority in the European Parliament; and (3) geopolitical pressures surrounding the vote.

• A narrow secret ballot rejected the proposal to send the Legal Affairs Committee (JURI) mandate directly to trilogue negotiations with the European Council and European Commission. The margin was approximately 390 votes against versus 308 in favor, with the difference of only nine to ten votes.

• The unusual decision to conduct a secret vote, requested by far-right Members of the European Parliament (MEPs), obscured which parties defected. Early estimates suggested that at least 30 MEPs from the Socialists and Democrats (S&D) bloc voted against their leadership’s position.

• The next milestone will be a plenary session on November 13, 2025, when the Parliament will reconsider the CSDDD mandate after amendments are submitted. Hundreds of proposed amendments are expected.

• At the broader level, speakers noted that European leaders—including French President Emmanuel Macron and German Chancellor Olaf Scholz—had recently met with senior corporate executives (“the 46 CEOs letter”) who expressed dissatisfaction with the directive, underscoring how high-level industrial lobbying and geopolitical factors are influencing the process.

Article 8: “The crux”

• The Council’s version was widely criticized as unworkable as it restricts companies to conducting initial scoping only at the first tier (Tier 1) of their supply chains and requires an in-depth follow-up process alongside a full value-chain mapping, resulting in unnecessary duplication and confusion.

• The European Parliament’s JURI Committee compromise was viewed as more aligned with the UNGPs and the OECD Guidelines. It adopts a two-stage, risk-based approach: companies must assess their own operations, subsidiaries, and all business relationships, prioritize by severity and likelihood, and then conduct deeper analysis where necessary.

• The so-called “small and medium-sized enterprises (SME) shield,” which limits the ability of companies to request information from SMEs, was identified as a significant flaw. If companies are legally restricted from gathering information but are still expected to identify and mitigate risks, due diligence becomes practically impossible.

• Panelists agreed that a viable legislative fix should (1) preserve the two-stage, risk-based model; (2) remove or clarify the SME shield; and (3) avoid combining restrictions with “safe harbor” provisions that shield companies from liability. 

Role of civil liability

• The panelists noted that civil liability provisions, though politically contentious, provide legal clarity. Removing them does not eliminate lawsuits but instead introduces uncertainty over applicable standards.

• Particular emphasis was placed on the need to restore the language on “overriding mandatory application” from Article 29(7) of the earlier CSDDD draft. This provision interacts with the Rome II Regulation. Its deletion would create procedural inconsistencies across Member States, affecting matters such as limitation periods and the applicable law for transnational claims.

Article 22: Climate transition plans

• Debate continues over whether the climate transition plans required under Article 22 will impose binding obligations or remain aspirational.

• Panelists suggested that limited adjustments to Article 22 could serve as a trade-off in negotiations if consensus is found on Article 8. However, they agreed that the current political environment makes such deals highly uncertain.

Implications for business practice 

• Corporate participants and advisors reported that claims of “simplification” are misleading. Poorly aligned legislation would force companies to maintain two parallel systems: one aligned with international standards (UNGPs and OECD Guidelines) and another for formal compliance with the CSDDD.

• Panelists advocated for designing one internal due diligence process that maps to multiple instruments rather than imposing duplicative reporting regimes.

• Examples of good practice discussed included:
  
  • Risk prioritization funnels: broad to deep scoping rather than blanket questionnaires).
  • On-site observations by procurement teams, e.g., assessing workplace safety or working hours.
  • Stakeholder engagement with affected groups rather than passive document collection.

Future of EU regulation and global compliance risks

• The speakers reemphasized that the original intent of the CSDDD was to create a level playing field within the EU, harmonizing existing national laws such as France’s Duty of Vigilance and Germany’s Supply Chain Act.

• If the CSDDD collapses, Member States will likely pursue divergent national approaches, while the EU’s other thematic regulations, such as the Deforestation Regulation and the Forced Labour Regulation, will continue independently.

• The ensued fragmentation would leave companies navigating a patchwork of overlapping regimes with inconsistent expectations, undermining both competitiveness and rights protection.

• Countries outside the EU, including South Korea, Thailand, Switzerland, Indonesia, Brazil, and Peru, are already drafting or considering due diligence laws, meaning that European firms would face fragmented global compliance instead of a unified standard.

Future of Corporate Sustainability Reporting Directive (CSRD)

• The CSRD revisions within the omnibus package would significantly raise reporting thresholds, excluding many companies previously covered.

• A newly proposed “value-chain cap” would also prevent companies from requesting data from business partners, mirroring the SME shield in the CSDDD and undermining transparency needed for credible reporting.

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