Backpedalling on Accountability: What the EU Omnibus Directive Means for Sustainable Finance

When the EU first introduced the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), it signalled a global step forward. Finally — a shared, science-based framework that gave investors clarity and companies direction.

But the draft “omnibus directive” introduced under the ordinary legislative procedure now threatens to reverse much of that progress.

Here’s what’s at stake — and why it matters.

1. Thresholds Raised, Accountability Narrowed

The proposed directive lifts CSRD thresholds to 3,000 employees and €450 million in turnover, up from the previous 1,000-employee threshold. This dramatically shrinks the number of companies covered — leaving thousands of smaller but high-impact firms outside the scope of mandatory reporting.

This is a direct hit to the data infrastructure that investors, banks, insurers, and rating agencies rely on. If fewer companies report, the entire ecosystem loses visibility — and the risks grow.

2. Voluntary Reporting for the Value Chain

In another shift, companies would no longer be required to gather sustainability data from suppliers and partners under the threshold. Instead, they’re expected to “do their best” — using available data, and explaining any gaps.

This reduces value chain transparency at a time when supply chain emissions, social risks, and labour concerns are top-of-mind for asset managers and regulators alike.

3. No More Mandatory Climate Transition Plans

Perhaps the most symbolic retreat: Article 22 on mandatory climate transition plans is repealed.

Under the new proposal, companies only have to disclose climate plans if they already have them. That’s not simplification — it’s surrendering ambition. It also penalises frontrunners who’ve already invested in credible planning.

4. Diluted Due Diligence Expectations

The updated due diligence rules limit companies’ responsibilities to their own operations, subsidiaries, and direct business partners — unless there’s a credible risk of serious harm.

The logic may sound reasonable, but in practice, it weakens the very purpose of due diligence: anticipating and preventing harm before it becomes material.

Companies may now delay action on lesser-known issues, and even avoid suspending problematic suppliers if doing so would cause “substantial harm” to themselves — a subjective loophole that will be hard to regulate.

5. Other Changes Worth Noting

• The new digital portal for sustainability disclosures is a step forward — but it doesn’t outweigh the damage from narrowed scope and reduced rigour.

• Tagging and assurance obligations are simplified until new standards are formalised.

• Member States will be prohibited from going beyond EU standards, which limits ambition.

• Transition plans are no longer expected from financial holding companies unless delegated.

6. The Bigger Picture: Europe’s Position at Risk

At a time when China, Brazil, South Korea, and other jurisdictions are moving toward stronger sustainability taxonomies, the EU’s proposal signals retreat.

This omnibus package doesn’t just delay action. It undermines the very idea that sustainable finance can be credible, consistent, and future-oriented.

As we’ve seen through SWISOX’s work, investors are hungry for real, granular, verified data — not vague promises. This directive risks robbing them of the tools they need.

Our Take

Reducing red tape doesn’t mean pulling apart the scaffolding. What we need isn’t less regulation — it’s smarter, science-based, and enforceable rules that support both business and planetary resilience.

Sustainable finance cannot function without clarity. The EU must course-correct — and fast.