The EU Omnibus Directive modifies the Corporate Sustainability Due Diligence Directive (CSDDD) to improve flexibility and reduce compliance burdens. Key changes include:

• Extended Compliance Deadlines: The transposition deadline of EU Omnibus directive is now July 26, 2027. Large companies must comply by July 26, 2028. This extension gives companies more time to implement due diligence.

• Refined Due Diligence Obligations: Companies no longer need to assess adverse impacts across complex value chains automatically. Instead, they must conduct full due diligence beyond direct partners only when plausible risks exist.

• Reduced Monitoring Frequency: Due diligence assessments now occur at least once in five years instead of at least once in a year, lowering administrative costs and compliance burdens.

• No Mandatory Business Relationship Termination: Companies no longer need to terminate business relationships as a last resort. This change helps manage supply chain risks without causing economic disruptions.

• Limited Data Requests from SMEs: Large companies can only request SME data specified in the Voluntary Standard for SMEs (VSME) unless extra data is necessary for compliance.

• Removal of EU-Wide Civil Liability Rules: Instead of an EU framework, national legal systems will set civil liability conditions, allowing member states to determine liability rules.

Measures to Protect SMEs and Small Mid-Caps from Excessive Sustainability Information Requests

While SMEs (excluding listed SMEs) are technically outside the scope of the CSRD, they often receive sustainability information requests from larger companies in their value chains or financial institutions subject to CSRD requirements. The omnibus package directly addresses this “trickle-down” effect by implementing safeguards that prevent excessive data requests from larger entities.

A key component of this protection is the adoption of the VSME, which will act as a shield for SMEs and small mid-caps. Companies within CSRD scope will not be permitted to demand sustainability data beyond what is outlined in the VSME standard. To further support SMEs, the Commission plans to issue a recommendation on voluntary sustainability reporting based on the VSME standard while awaiting its formal adoption through a delegated act.

Additionally, the omnibus package proposes further simplifications to the CSDDD to ease the burden on smaller business partners, including:

• Limiting due diligence obligations beyond direct business partners,
• Reducing the frequency of monitoring due diligence effectiveness from annual assessments to once every five years.

These changes significantly lessen the reporting and compliance obligations for SMEs while maintaining the integrity of sustainability disclosures across value chains.

Expected Benefits of the Proposed Modifications

The EU Omnibus directive’s changes to the CSRD and CSDDD are expected to yield significant cost savings for businesses while enhancing EU competitiveness. Key anticipated benefits include:

• Cost Savings for Reporting Companies: Reducing the CSRD’s scope and simplifying ESRS reporting requirements will generate estimated annual cost savings of €4.4 billion. This includes €0.8 billion in savings from reduced Taxonomy reporting requirements.
  
  
• Reduced Administrative Burden for SMEs: The VSME voluntary standard and reporting limitations will alleviate the compliance strain on SMEs and small midcaps, enabling them to focus on core business operations while maintaining sustainability transparency.
  
  
• Streamlined Due Diligence Obligations: Companies will face a less complex and more harmonized sustainability due diligence framework, resulting in an estimated €320 million in annual savings. The extension of monitoring intervals and reduced information requests from smaller business partners will further ease compliance challenges.

If you want to learn how to stay ahead of these ever evolving regulations, schedule a call now with Sprih’s expert team.