What the omnibus gave us: a return to the fundamentals of Sustainability

Sustainability didn’t begin with the launch of the European Green Deal. Multiple practices enshrined in national law throughout Europe and beyond have become so connected with Good Business practices that questioning them is not even on the table.

Slavery, Child Labor, Forced Labor, Bribery, Corruption, Pollution level limits, to name a few examples, represent practices that European societies have long decided represent liabilities. Yesterday’s Omnibus proposal has no impact on those; so what does the Omnibus represent for companies operating within the EEA today?

CSRD

1. As of today, the Omnibus proposal remains a proposal. The EP will need to either approve it or return it to the Commission for changes. For companies that need to report on CSRD and EU Taxonomy for FY 2024, those disclosure obligations stand.
2. Even if enacted, the current Omnibus proposal wouldn’t change reporting obligations currently in scope of CSRD: companies with more than 1000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million.
3. The concept of Double Materiality remains.
4. The ESRS’ General Disclosures 1 and 2 will remain mandatory, although further simplification of its contents is possible. This specifically includes the collection of information regarding your business partners and suppliers throughout the value chain.
5. The entry into force of sector-specific ESRS’ would be postponed.

EU Taxonomy

1. Creation of an opt-in regime for companies with more than 1000 employees and a net turnover under EUR 450 million.
2. Companies that claim their business activities contribute towards a NetZero future will need to demonstrate alignment or partial alignment with Taxonomy.
3. Financial KPIs in Taxonomy will change, with turnover and CapEx remaining mandatory, while OpEx becoming a voluntary disclosure.
4. Although the proposal does not contain the full details, the goal is also to decrease complexity of the DNSH criteria.

CSDDD

1. Due Diligence for Tier 1 suppliers (direct business partners) remains unchanged.
2. Due Diligence further downstream the supply chain should be enacted whenever there are indications of potential adverse impacts.
3. Due Diligence and self-assessment within one’s own company and own operations remains unchanged.

Beyond the omnibus: national legislations

The First Omnibus proposal applies only to the three EU laws mentioned above and to CBAM (Carbon Border Adjustment Mechanism). It has no impact on related national legislations about supply chain due diligence that have already entered into force. Here follows a brief description of the supply chain requirements mandatory under three of them:

Norwegian Transparency Act (Åpenhetsloven)

1. Medium and large companies having their financial domicile in Norway must comply. Enforcement is overseen by the Norwegian Consumer Authority (Forbrukertilsynet).
2. Risk-based supply chain due diligence must be carried out on an annual basis, with reports published no later than June 30.
3. Due Diligence is required both for a company’s own operations and across all tiers of the chain.

German Supply Chain Act (LkSG)

1. Applicable to all companies with over 1000 employees operating in Germany.
2. Requires the establishment of a risk management system to track potential Human Rights or environmental violations.
3. Companies must at least on an annual basis do due diligence on their own business operations and those of their Tier 1 suppliers.
4. An annual report with the result of their due diligence activities must also be published.

Swiss Ordinance on Due Diligence and Transparency (VSoTR)

1. Came into effect on January 1, 2022, with the first reports published in early 2024, for FY 2023.
2. Applies to companies registered in Switzerland which either procure minerals or metals from conflict areas and high-risks regions.
3. Also applies to companies that offer products or services potentially produced using child labor.
4. Requires companies to set up and follow a Due Diligence process and use instruments to mitigate risks throughout their supply chain.

What comes after the Omnibus?

Risk management in one’s supply chain remains an area of concern to be tackled by any company. Risk management requires assessment processes to be in place, as well as mechanisms to identify potential risks. Companies operating in specific geographies will find their disclosure obligations largely unchanged by the Omnibus proposal, assuming the proposal will be even adopted in its current form, which looks unlikely given political fragmentation within the EP.

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Do you have questions about how the Omnibus proposal might impact your business? Contact us to discuss what these changes mean for your reporting and compliance strategy.