Promising measures on steel decarbonization and circularity undercut by proposals to dismantle landmark supply chain sustainability legislation
Civil society organizations across the globe are criticizing the announcement of the much-anticipated Omnibus package on sustainability by EU Commissioner for Economy and Productivity Valdis Dombrovski. The Omnibus package is a sweeping deregulation initiative targeting the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the Taxonomy Regulation. Rather than simplifying these landmark achievements in EU regulations, the proposed Simplification Omnibus would beget a wholesale dismantling of these critically important corporate sustainability policies, and would drastically slow progress toward building clean and equitable supply chains across the globe.
Giorgia Ranzato, sustainable finance manager at T&E, said: “The infamous Omnibus package is out. While there is space for simplification, today’s proposal throws Europe into reverse, erasing a decade of gains in sustainability and global competitiveness. If approved, the new sustainability reporting obligations will only apply to 0.02% of European companies. This risks a disastrous lack of ESG data across the region, creating a nightmare for responsible investors and consumers. This new package guts corporate accountability.”
The Omnibus proposal would restrict due diligence requirements from the CSDDD to direct suppliers, despite the fact that it is deeper in the supply chain where the most egregious abuses are often located. The proposal also limits mandatory due diligence monitoring to once every five years, instead of annually, and scraps civil liability for companies that abuse workers and communities, effectively “stripping victims of their ability to go to court to stop harm or seek compensation” and “tilting the playing field in favour of irresponsible businesses.” On climate, the proposal would eliminate the requirement for companies to implement their climate transition plans, rendering these plans essentially meaningless.
“The omnibus proposal dismantling the Corporate Sustainability Due Diligence Directive (CSDDD) is a win for big business and a disaster for the environment and human rights,” said Matthew Groch, a Senior Director at Mighty Earth. “This proposal will let companies like automakers ignore human rights violations and environmental harm in their supply chains while putting profits over sustainability. Without enforceable accountability, the EU’s “just” transition risks being built on exploited workers, deforestation, and accelerated climate change.”
The proposal is especially disheartening given that this year’s Lead the Charge Leaderboard revealed how advances in EU policy and regulations are driving better performance in the automotive industry on supply chain sustainability and due diligence. The Leaderboard also shows that European automakers are leading the industry in these same areas, giving them a competitive advantage.
It is not surprising, therefore, that over 140 responsible investors and business associations, representing more than 6,000 businesses, have opposed the renegotiation of the CSDDD, insisting that “the most practical step the European Commission can take to support future competitiveness is to focus on developing the clear and practical guidance needed to support businesses in implementing the CSDD.” Despite this, the commission has chosen to “selectively listen to old oil and gas companies and backward-looking business associations.”
“By eroding the Corporate Sustainability Due Diligence Directive (CSDDD), the Omnibus proposal undermines critical protections for Indigenous Peoples. Our communities often reside on lands targeted for resource extraction, it is a given that 54% of Energy Transition Minerals are on or near Indigenous Peoples’ territories, yet the proposed deregulation weakens corporate accountability for abuses hidden deeper within supply chains. Without strong, enforceable standards, the promised green energy transition risks repeating old patterns of exploitation, where profits are prioritized over our rights, cultures, and well-being,” said Galina Angarova, Executive Director of the SIRGE Coalition.
At the same time that it proposed gutting corporate sustainability regulations, the EU Commission recommitted to climate action with the Clean Industrial Deal (CID), which lays solid foundations for the EU to accelerate progress in key areas such as steel decarbonization and circularity.
Julia Poliscanova, senior director for vehicles and emobility supply chains at T&E, said: “The faltering European battery companies need urgent action to put the trade and investment pledges in the Clean Industrial Deal into action. A green labelling system can play to Europe’s strengths as a more sustainable manufacturer of steel and batteries. But we need to see much more detail about how labelling, as well as local content requirements, will actually work. The plans to overhaul state aid rules also do not go far enough for the EU to build up clean tech manufacturing.”
The CID should help smooth the way and provide companies with a clear and consistent regulatory framework, and hold them accountable for failing to spend the public financing earmarked for their decarbonisation. It should also help to motivate major industries to switch to purchasing green steel by offering financial and regulatory incentives, including by proposing an expansion to the Carbon Border Adjustment Mechanism so that it also covers key downstream products that use large quantities of steel, aluminum and other materials covered by the policy.
Automakers operating in the EU – the world’s largest auto market – should join the chorus of industry voices that are opposing the commission’s proposal to dismantle the CSDDD.