"The European Commission’s ‘Omnibus Simplification Proposal’: Shift’s Initial Reflections", 6 March 2025

The European Commission has launched its Omnibus Simplification Proposal to address concerns about sustainability regulations in the EU. But measured by its own objectives of simplifying requirements and reducing burdens on smaller companies, the proposals are a remarkable own goal. Negotiations in the coming months must be grounded in a practical grasp of what actually works in sustainability due diligence and reporting, if the final package is to make sense... It is risk-based due diligence that delivers on the ultimate purpose of the EU legislation: improved human rights and environmental outcomes...

Proposed changes would ask companies to do risk-based due diligence, but then constrain their proactive efforts to their first tier business partners, which is typically not where the greatest risks reside. It would then make it harder to understand what is happening even within that first tier by allowing them to ask only their largest business partners for the very information that is needed to actually manage the risks... The Commission’s proposal risks creating burdens for SMEs – rather than lessening them, as intended.

Companies will now have to rely even more heavily on demanding that their first-tier business partners ‘pass back’ requirements to meet the company’s Code of Conduct to the next tier, with less freedom to engage directly in finding solutions. Risk-based due diligence enables companies to allocate resources to the most severe risks in their value chain and support solutions with targeted capacity-building, collaborative efforts that pool resources, and mutual responsibility with suppliers – for instance recognizing how a company’s own purchasing practices affect suppliers’ ability to manage risks. It’s the off-loading of requirements and remote policing of compliance that creates the primary burden on smaller companies... The proposed changes to the CSRD will also perpetuate the complex set of data demands from financiers and others that the CSRD sought to reduce...