Author: Dr. Ezgi Uysal

1)    Introduction

This blog post is the first in a two-part series that examines the evolving EU regulatory landscape on corporate sustainability due diligence and its implications for the future of public procurement law.¹ In particular, it considers the recent shift in emphasis toward regulatory simplification and what this may mean for the future of corporate sustainability. It also sets the stage for a broader discussion on the interplay between the Corporate Sustainability Due Diligence Directive (CSDDD) and public procurement law, particularly in view of the forthcoming revision of the EU public procurement framework. In this context, it needs to be noted that the points of tension between corporate sustainability due diligence and public procurement have been discussed in detail elsewhere.² This two-part series seeks to extend the research undertaken in 2023 by offering further reflection on the identified challenges, especially in the context of the Commission’s renewed emphasis on European competitiveness and the anticipated revision of public procurement legislation.

This first post examines the ongoing formalisation and transformation of soft law instruments into binding obligations in the field of corporate sustainability. It provides an overview of the scope and substance of the recently adopted CSDDD and reflects on the broader implications of the Omnibus Simplification on the CSDDD. In doing so, it also considers the ways in which these regulatory changes are being welcomed—or resisted—by various stakeholders, particularly in relation to concerns about European competitiveness and the administrative burdens placed on companies.

2)    From Soft Law to Hard Law

The globalisation of production has facilitated a system in which businesses can strategically select jurisdictions with lower production costs and lower levels of regulation.³ While the protection of human rights is the duty of the state, host States, often developing countries, may hesitate to regulate transnational corporate conduct for fear of deterring investment.⁴ This structure gives rise to governance gaps, ie legal loopholes allowing “a permissive environment in which companies can commit wrongful acts” without repercussions and to the detriment of human rights and the environment.⁵

In this context, measures were adopted in the form of soft law with an aim to mitigate the negative impacts of businesses on human rights and the environment, the most prominent being the UN Guiding Principles on Business and Human Rights which introduced the concept of “human rights due diligence” (HRDD) under the second pillar of the “Protect, Respect and Remedy Framework” ie the corporate responsibility to respect human rights. Similarly, adding environment and governance topics to the scope of due diligence, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct further extended the concept to “human rights and environmental due diligence” (HREDD).

In the past decade, both European and non-European states have taken steps to legislate responsible business conduct and introduce hard laws on HREDD.⁶ With an aim to ensure a level playing field in the internal market, in 2022, the European Commission has put forward its Proposal for a Directive on Corporate Sustainability Due Diligence. After meticulous negotiations, the CSDDD was published in the Official Journal on 5 July 2024. Entered into force on 26 July 2024, the CSDDD provides for Member States to transpose the Directive into national law by 26 July 2026, and a phased application of the obligations, based on decreasing employee thresholds and turnover levels.

3)    The Scope of the CSDDD

CSDDD does not spell out each measure to be taken, as this will be based on “the industry, geographical scope, severity, likelihood and the specific nuances of each individual case”.⁷ However, parallel to the OECD Guidelines Multinational Enterprises on Responsible Business Conduct’s HREDD steps, CSDDD introduces the following obligations to carry out risk-based corporate sustainability due diligence in value chains:

• integrating due diligence into their policies and risk management systems (Article 7);
• identifying and assessing actual or potential adverse impacts (Article 8) and, where necessary, prioritising actual and potential adverse impacts (Article 9);
• preventing and mitigating potential adverse impacts, and bringing actual adverse impacts to an end and minimising their extent (Articles 10 and 11);
• providing remediation for actual adverse impacts (Article 12);
• carrying out meaningful engagement with stakeholders (Article 13);
• establishing and maintaining a notification mechanism and a complaints procedure (Article 14);
• monitoring the effectiveness of their due diligence policy and measures (Article 15);
• publicly communicating on due diligence (Article 16)

Unlike the UNGPs, which provide that the responsibility of businesses applies to all enterprises regardless of their size, pursuant to Article 2, only big companies fulfilling certain conditions are required to carry out corporate sustainability due diligence under the CSDDD. These are:

• EU companies with over 1000 employees and a worldwide turnover of a minimum of 450 million euros;
• Non-EU companies that operate in the EU and have an annual turnover in the EU of over 450 million euros;
• Ultimate parent companies of a group which reach these thresholds;
• Companies/Ultimate parent companies of a group that have entered into franchising or licensing agreements in the EU in return for royalties amounting to more than 22,5 million euros in the EU, and a net turnover of more than 80 million euros.

Based on publicly available data, both the European Commission and SOMO have identified approximately 7,000 companies (both European and non-European) that fall under this scope.⁸

4)    European Competitiveness and the Future of Sustainability

Soon after the adoption of the CSDDD, in his report, The Future of European Competitiveness, Draghi stressed the regulatory burden on European companies and the need for a landscape that promotes competitiveness and resilience. This was followed by the Budapest Declaration on the new European Competitiveness Deal, in which the EU leaders highlighted the importance of enhancing the Union’s competitiveness, focusing on regulatory simplification by calling for “a simplification revolution, ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs”.

At the beginning of 2025, taking these concerns into account, the Commission published its Competitiveness Compass for the EU, pointing out the impact of high regulatory burden has on competitiveness and as part of the simplification efforts undertook to propose a series of Simplification Omnibus Packages, the first of which will aim at simplification concerning sustainable finance reporting, sustainability due diligence and taxonomy. Later, in its Work Programme for 2025, the Commission announced that this first set of Omnibus proposals will aim to streamline and simplify sustainability-related legislation, with the goal of reducing “administrative burdens by at least 25% and at least 35% for SMEs.” Subsequently, in A Simpler and Faster Europe, it was specified that the Omnibus package on sustainability will

ensure better alignment of the requirements with the needs of investors, proportionate timelines, financial metrics that do not discourage investments in smaller companies in transition, and obligations proportionate to the scale of activities of different companies. It will notably address the trickle-down effect to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators. The carbon border adjustment mechanism requirements will be eased to the benefit of smaller importers, specifically for SMEs and authorities.

In line with the Commission’s commitments, the First Omnibus Package was published in February, which encompasses:

• Stop-the-Clock Proposal postponing the application of Corporate Sustainability Reporting Directive (CSRD) for some companies and postponing the transposition deadline for the first wave of CSDDD companies;
• Proposal for a Directive amending CSRD and CSDDDD;
• A draft delegated act amending the Taxonomy Disclosures Delegated Act, the Taxonomy Climate Delegated Act, and the Taxonomy Environmental Delegated Act;
• Proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation.

While the Stop the Clock Proposal was adopted (see Directive 2025/794), the discussion on the Proposal for a Directive amending CSRD and CSDDD has recently started in the Council.

5)    Omnibus Changes to CSDDD

The changes foreseen to the CSDDD based on the Commission’s Proposal for a Directive amending CSRD and CSDDD are summarised below:

• Extending the scope of maximum harmonisation pursuant to Article 4 of the CSDDD;
• Limiting the chain of activities covered by due diligence obligations in the normal course to tier one (direct) business partners under Article 8 of CSDDD;
• Exception: in case of plausible information that suggests an adverse impact on the operations of an indirect business partner, an in-depth assessment is also required at the level of indirect business partners.
• Limiting the information requests vis-à-vis SME and SMC business partners for mapping adverse impacts (“SME shield”) under Article 8 of CSDDD to reduce the indirect compliance costs;
• Exception: in case additional information is necessary in light of indications of likely adverse impacts or because the standards do not cover relevant impacts, and where such additional information cannot reasonably be obtained by other means.
• Omission of the obligation of the last resort measure to terminate the business relationship under Articles 10(6) and 11(7) of CSDDD;
• Simplifying the notion of ‘stakeholder’  under Article 3(1)(n) of CSDDD and limiting the stages of the due diligence process which require stakeholder engagement under Article 13 of CSDDD;
• Reducing the frequency of periodic assesments and possible updating of due diligence policy and measures from “at least every 12 months and whenever there are reasonable grounds to believe that new risks of occurence of those adverse impacts may arise” to “at least every 5 years and whenever there are reosanble grounds to believe that measures are no longer adequate or effective or that new risks of the occurence of those adverse impacts may arise” under Article 15 of CSDDD;
• In addition to the postponement of the transposition and application deadlines of CSDDD foreseen with the Stop-the-Clock Directive, the acceleration of adoption of Commission guidelines pursuant to Article 19(3) of CSDDD;
• Replacing the “obligation to adopt and put into effect a transition plan for climate change mitigation” with “obligation to adopt a transition plan for climate change mitigation” under Article 22(1) of CSDDD;
• On penalties for infringements, omission of the requirement under Article 27(4) of CSDDD that the maximum pecuniary penalties be no less than 5% of worldwide turnover;
• Removing the EU-level civil liability and omission of certain access to justice provisions under Article 29 of CSDDD;
• Omission of the review clause concerning “additional sustainability due diligence requirements tailored to regulated financial undertakings with respect to the provision of financial services and investment activities, and the options for such due diligence requirements” under Article 36 CSDDD.

As explained by the Commission, the underlying rationale for proposed amendments lies in the concern that the CSDDD could create disproportionate burdens on EU-based companies, especially when competitors from outside the EU are not yet subject to similar obligations.⁹ Based on the Commission Study, it is expected that the adoption of the changes proposed by the Commission to the CSDDD will give rise to an annual cost saving of 320 million euros and a one-off cost saving of 60 million euros.¹⁰ Additionally, the proposed SME shield is expected to reduce the indirect costs associated with the shift of compliance burden.¹¹

6)    Stakeholder Reactions to Simplification Agenda

Since Draghi’s call for a wave of regulatory simplification, various stakeholders have increasingly voiced their views on the future of sustainability-related legislation.¹² In this context, while the call for simplification has been welcomed by some business associations and politicians, the proposed changes to CSDDD have also attracted criticism from businesses, civil society organisations, researchers, and business and human rights practitioners.¹³

On the one side, following the Draghi report, 25 European business associations representing companies and sectors impacted by the CSDDD published a joint statement embracing the simplification agenda, highlighting that an intervention is needed to ensure European competitiveness.¹⁴ This was followed by a joint declaration by business leaders from France, Germany, and Italy provocatively named “European interests, new European ways – Catch-up or face the decline of Europe” calling for a competitiveness assessment for the CSDDD.¹⁵

On the other side, the existence of parallel due diligence legislation in non-EU states refutes the narrative that such regulation is detrimental to the “international competitiveness”.¹⁶ In this context, it was stressed that the First Omnibus Package “not a simplification initiative to support objectives of this legislation and to support companies in their sustainable transition towards more resilient and competitive business models” but a “deregulatory agenda”.¹⁷ A wide range of stakeholders—including the Office of the High Commissioner for Human Rights, multi-stakeholder organisations, businesses, legal scholars, civil society organisations, and business and human rights practitioners—have expressed concern over the proposed changes to the CSDDD.¹⁸

While to changes proposed to the CSDDD are being criticised due to the watered-down corporate sustainability due diligence, the legislative process itself is being subject to formal complaint before the European Ombudsman on the basis that the preparation of the Proposal amending CSRD and CSDD constitutes maladministration.¹⁹ The complaint is based on the argument that the Commission’s selective and non-transparent consultation process, with specific stakeholders, risks undermining democratic legitimacy and diminishing public trust in EU institutions.²⁰

Though it is still early in the legislative process to draw final conclusions,²¹ it appears that in seeking to strike a balance between “enough regulation” and “not overburdening companies” the latter has been continuously prioritised, even before the First Omnibus Package.²² This trend is clearly reflected in the proposed changes to CSDDD. As a result, it seems increasingly unlikely that the CSDDD, as adopted last year, will remain intact. As the EU seeks to balance the tension between sustainability and competitiveness, the First Omnibus Package raises new questions for public procurement. Part 2 of this blog series will delve into not only how the original CSDDD addresses public procurement, but also how anticipated amendments to the CSDDD might interact with the ongoing revision of EU procurement legislation.

References

1. The findings summarised in the blog are presented at “EU Public Procurement anno 2025 – Are the rules fit for purpose?” hosted at the University of Copenhagen.
2. Laura Treviño-Lozano and Ezgi Uysal, ‘Bridging the Gap between Corporate Sustainability Due Diligence and EU Public Procurement’ (2023) 30 Maastricht Journal of European and Comparative Law 554.
3. Louise Vytopil, Contractual Control in the Supply Chain on Corporate Social Responsibility, Codes of Conduct, Contracts and (Avoiding) Liability (Eleven International Publishing 2015) 27.
4. John Ruggie, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (2008) 3(2) Innovations: Technology, Governance, Globalization 189, 192.
5. Advocating for the EU Corporate Sustainability Due Diligence Directive Against the Odds: Strategies and Legitimation, 1.
6. Céline da Graça Pires and Daniel Schönfelder, ‘Mandatory human rights and environmental due diligence in practice: key insights from France and Germany’ (2025) 4 Revista Española de Empresas y Derechos Humanos 3, 3.
7. Anna Kuusniemi-Laine, Lia Heasman and Laura Vuorinen, ‘Corporate Sustainability Due Diligence Directive (CS3D) Changes the Legal Landscape for Large Companies and Their Chains of Activities’ (2024) 18(1) Helsinki Law Review 8, 13.
8. European Commission, ‘Commission Staff Working Document Accompanying the documents, Proposal for a Directive of the European Parliament and of the Council amending Directive 2006/43/EC, 2014/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence’ SWD (2025) 80, 9; ‘ CSDDD Datahub reveals law covers fewer than 3,400 EU-based corporate groups’ https://www.somo.nl/csddd-datahub-reveals-law-covers-fewer-than-3400-eu-based-corporate-groups/.
9. European Commission SWD (2025) 80 (n 8) 10.
10. ibid 43.
11. ibid.
12. See ‘Joint trade association statement towards EU due diligence that works for all https://www.eurochambres.eu/publication/joint-trade-association-statement-towards-eu-due-diligence-that-works-for-all/; ‘European interests, new European ways – Catch-up or face the decline of Europe’ https://www.medef.com/uploads/media/default/0020/04/16203-declaration-commune-bdi-confindustria-medef.pdf; ‘Broad Support for the CSDDD’ https://www.we-support-the-csddd.eu/.
13. ibid.
14. ‘Joint trade association statement towards EU due diligence that works for all’ (n 12).
15. ‘European interests, new European ways – Catch-up or face the decline of Europe’ (n 12).
16. Nicolas Bueno, Nadia Bernaz, Gabrielle Holly and Olga Martin-Ortega, ‘The EU Directive on Corporate Sustainability Due Diligence (CSDDD): The Final Political Compromise’ (2024) 9(2) Business and Human Rights Journal 294, 299.
17. ‘Smart implementation of EU sustainability reporting standards: make complying with rules easy’ https://www.clientearth.org/latest/documents/smart-implementation-sustainability-reporting/.
18. See for different stakeholders ‘Broad Support for the CSDDD’ (n 12).
19. ‘Complaint to the European Ombudsman on the Omnibus proposal’ https://www.clientearth.org/latest/documents/complaint-to-the-european-ombudsman-on-the-omnibus-proposal/.
20. ibid.
21. See ‘First Omnibus package on sustainability – proposal amending CSRD and CSDDD’ https://www.europarl.europa.eu/legislative-train/package-simplification-business/file-first-omnibus-package-on-sustainability-proposal-amending-csrd-and-csddd.
22. Verity McCullagh, ‘The EU Corporate Sustainability Due Diligence Directive: Real Change or More of the Same?’ (2024) 35(5) European Business Law Review 603, 625.