Just months after the EU's Corporate Sustainability Due Diligence Directive (CSDDD) passed — a legislative effort to hold corporate businesses accountable for reducing environmental and societal harm in their supply chains — the European Commission came out with a contradicting proposal that would walk back on the corporate accountability laws it had just passed.
Oxford legal scholars warn that the Omnibus Simplification Package (OSP), a multi-part proposal that includes delays in legislative implementation and the simplification of certain sustainability laws, such as the CSDDD, would weaken corporate accountability commitments, increase costs for companies, and further compromise human rights and environmental protection, Fortune reported.
What is the CSDDD and the Omnibus Simplification Package?
The EU proposed the Corporate Sustainability Due Diligence Directive (CSDDD) in February 2022 — a legislative effort that called for corporate accountability, requiring companies to examine their supply chains and make appropriate changes to correct any human rights violations (e.g., child labor, unsafe working conditions, unfair pay, etc.) and minimize environmental harm.
The EU took over a year and a half deliberating on the scope of the law, including determining which companies the law would apply to, how much due diligence the law requires, and the consequences of violating the law, yielding a final version of the CSDDD by December 2023.
The EU voted for and officially passed the CSDDD the following May and June, with the law entering into force in July 2024. This initiated the countdown for EU members to incorporate the EU directive into their own national laws, a process also known as transposition.
Originally, EU members were given two years to write the directive into national law, which made the transposition deadline July 2026.
However, due to increased complaints from some EU members about the complexity and haste of implementing the CSDDD, the EU proposed the Omnibus Simplification Package (OSP) in February this year, only seven months after passing the CSDDD.
In April, the EU adopted the "Stop-the-Clock" directive as part of the OSP, which approved timeline delays, granting EU members and companies an extra year to determine how to implement the CSDDD.
The transposition deadline for EU members was moved from July 2026 to July 2027. Large corporations required to monitor and report their activity under the CSDDD have an extra year — until July 2028 — to begin following the rules.
Why is the CSDDD important?
Adopting the "Stop-the-Clock" directive, which gives EU members and companies more time to implement the new corporate accountability laws, opens the door for more CSDDD initiatives to be overturned.
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Additionally, the leniency that the OSP introduces makes it easier for large corporations to adopt a voluntary action mindset in claiming environmental responsibility, despite large corporations accounting for the majority of the world's pollution.
Commenting on the EU's potential attempt to mimic or contribute to the US environmental deregulation efforts, Thom Wetzer, associate professor of law and finance at the University of Oxford, said: "The European Union is proving itself not to be a reliable regulator because they're flip-flopping in the face of changing political winds."
"The message from Brussels couldn't be clearer: industry interests come first, while people and the planet are left behind," said Marion Lupin, policy officer for the European Coalition for Corporate Justice, per Fortune.
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