The EU’s Omnibus Proposal: A Reckless Retreat from Sustainability

This is a guest article written by Richard Gardiner, Head of Public Policy at the World Benchmarking Alliance.

The European Union has worked hard over the last ten years to position itself as a global leader in sustainability legislation that aims to foster greater corporate accountability. This push was driven by the need to respond to human rights disasters such as the Rana Plaza factory collapse, where workers in a factory serving western markets died due to unsafe and hazardous working conditions. 

The flagship legislations of this sustainable drive were the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), which aimed to set a high new bar for companies, requiring them to both understand and address their environmental and social impacts. These initiatives stemmed from a European-wide realisation that the voluntary measures corporations long argued were sufficient had, unsurprisingly, failed to compel real change. The message was clear: we needed to use the stick, not just the carrot, to push companies towards more sustainable corporate behaviour. 

Yet, in a matter of months, the European Commission has destroyed the EU’s credibility as a standard-setter in sustainable finance and corporate governance through a staggering act of political backpedalling, undoing the more than five years of negotiations, assessments, evidence gathering and stakeholder testimony. 

Deregulation, straight and simple

This backpedalling took place under the banner of an “omnibus” proposal which has been described ad nauseum as a “simplification” of existing rules. However, make no doubt about it: this is “deregulation”, straight and simple. It is clear that the changes proposed in this “omnibus” are not the product of rigorous economic analysis or stakeholder consultation. Instead, they are the result of political pressure from industry lobbies that have sought to weaken sustainability obligations under the guise of reducing “red tape”. This argument is fundamentally flawed: corporate due diligence and sustainability reporting are not bureaucratic burdens, but essential tools for ensuring ethical, risk-aware and future-proof business practices. This move, far from being a pragmatic “adjustment”, as some policymakers claim, is a concession to corporate lobbying and short-term economic interests.

Weakened accountability, easier greenwashing

With this move, the EU is not only undermining its climate commitments, but also the legal certainty that businesses themselves have been calling for. Indeed, any even cursory reading of the proposal makes clear that the omnibus proposal will significantly weaken the scope and ambition of both the CSDDD and CSRD, rolling back provisions that came from hard-fought victories by key civil society, investor and forward-thinking business actors. 

By narrowing the scope of companies covered by CSRD, the Commission is gutting the transparency needed for investors and consumers to make informed decisions. The removal of these reporting requirements weakens accountability, making it easier for businesses to greenwash their operations without undertaking substantive action.

Through effectively reducing the obligations of the CSDDD to potentially a box-ticking exercise, the omnibus proposal waters down the requirements for companies to address risks in their supply chains, making due diligence a mere formality rather than a meaningful compliance mechanism.

Legal and economic uncertainty

The timing of this legislative U-turn is particularly troubling. With the world at a critical juncture in addressing climate change, biodiversity loss and human rights violations, the EU’s regulatory framework should be strengthening corporate accountability, not dismantling it. Instead, the omnibus proposal sends a dangerous message: that Europe is willing to prioritise corporate convenience over planetary and social well-being.

Beyond the environmental and social consequences, this backpedalling also creates economic uncertainty. Many businesses have already invested heavily in sustainability strategies aligned with the CSDDD and CSRD, assuming that these laws would provide a stable policy framework. Rolling back these rules at this stage creates regulatory whiplash, undermining long-term corporate planning and discouraging investment in sustainable supply chains.

Moreover, watering down sustainability regulations puts European businesses at a competitive disadvantage. 

Testing Europe’s commitment to sustainability

So what comes next? The omnibus proposal is not a done deal. The politicians, civil society actors and businesses that have already been strong advocates for corporate sustainability will have the opportunity to push back against these changes. Meanwhile, the new German government, under increasing pressure from industry to deliver on “competitiveness”, will be a key player in deciding whether these rollbacks go forward or if a more balanced approach can be agreed upon.

The coming months will test Europe’s true commitment to sustainability and corporate accountability. Will policymakers cave to short-term business interests, or will they stand firm in defence of the green transition? The answer will shape not only the EU’s regulatory landscape but also its reputation as a leader in responsible business conduct. If Europe truly wants to lead the global economy, it must reject this reckless retreat and reaffirm its commitment to sustainability, transparency and corporate responsibility.