Omnibus Or Not, Due Diligence Is a Must: Policy Breakdown  

By Hélène Bohyn, Policy and Advocacy Manager at Better Cotton

A package, a proposal, a directive… a bus?  If you are not closely monitoring the many hiccups of the EU regulatory landscape, you may have seen a lot about it but still be wondering what the Omnibus Package is really all about. In short, it is a proposal made by the European Commission to amend key corporate sustainability reporting and due diligence requirements in four directives adopted between 2006 and 2024. These include the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

Beyond postponing the CSDDD’s entry into application by one year and certain provisions of the CSRD by two years, the Omnibus also hugely reduces the number of companies required to comply, and waters down the very concept of supply chain due diligence. This has triggered a massive pushback from a broad group of stakeholders who view the prioritisation that the EU is giving to competitiveness as deregulation rather than meaningful simplification. Initially introduced to reduce administrative and reporting burdens, especially for SMEs, while boosting business competitiveness, the Omnibus has instead weakened corporate accountability – a concern we share.

At Better Cotton, at the time these key EU legislations were adopted, we had already started adapting our standards system to support our 2,500+ members in meeting their compliance requirements and advancing sustainability in the cotton supply chain, from farm to brand. As an ISEAL code-compliant standard since 2016, we will continue to play a crucial role in supporting companies’ efforts towards responsible business conduct. We realise our contributions go beyond Omnibus, and we won’t compromise our credibility. Instead, we encourage sector-wide efforts to continue investing in what is right.

Why Does Due Diligence Matter?

Over the past few years, the EU has been adopting new requirements on everything from financing to supply chain due diligence, reporting, product design and claims.By doing so, it is looking to ensure that companies operating within its jurisdiction adhere to high standards of human rights and environmental protection. Not just because these values align with its founding treaty, but also because EU policy makers want to foster a business environment that is more sustainable, transparent and, perhaps most importantly, more competitive.

Businesses must know all about their supply chain: from where raw materials originate and how their extraction or production impacts local communities and natural resources; to the manufacturing, delivery, sale and disposal of goods and services; and all the activities and people involved along the way.

Whilst the reporting requirements under the CSRD were designed to enhance companies’ transparency and accountability, the CSDDD was meant to create a level playing field for businesses by aligning with international standards like the UN Guiding Principles on Business and Human Rights (UNGP). By weakening the due diligence requirements under CSDDD, however, the Omnibus risks disconnecting the directive with UNGP, undermining its ability to protect human rights and the environment across global supply chains.

What Are Our Main Concerns?

• Major reduction in scope: The cumulative impact of reducing the scope of CSRD[1] and CSDDD being now limited to direct suppliers means that the number of companies covered by the Omnibus requirements will drop from 55,000 to 7,000. This is about 80% less than initially foreseen, something that will massively impact the transparency ambitions initially set forth.

• Limited due diligence duty: With due diligence being reduced to direct suppliers, the process will no longer follow a risk-based approach capable of addressing harms where they are most prevalent – which is rarely at Tier 1. Its effectiveness will, therefore, rely exclusively on codes of conduct with direct suppliers and contractual cascading. Companies will also now be required to conduct supplier monitoring every five years instead of on an annual basis, and will be able to ‘suspend’ instead of terminating business relationships in case of potential and actual adverse impacts.

• Removal of meaningful stakeholder engagement: The scope of stakeholders that companies must engage with is now limited to only ‘relevant’ stakeholders – that is those that have a link to the specific stage of the due diligence process (direct suppliers only). This will result in removing meaningful engagement with all relevant stakeholders, including civil society organisations, that could bring much-needed expertise to support prevention and remediation.

• Greater harmonisation will limit the flexibility of Member States: Because it is a directive (as opposed to a regulation), all EU Member States will have to transpose the Omnibus to fit it into their national laws. Whilst the harmonisation component under the CSDDD allowed Member States to impose stricter national due diligence requirements in certain areas (such as risk assessment, value chain due diligence, and penalties), going beyond the directive will no longer be permitted.

What Have Voluntary Sustainability Standards Got To Do With All That?

The transition from soft law to hard law initially triggered some existential questioning for Voluntary Sustainability Standards like Better Cotton. However, the current situation represents an opportunity to demonstrate our legitimacy as credible systems able to support due diligence where it is most needed: at the least visible and lowest tier of the supply chain.

Since 2021, we have been implementing our own due diligence framework, reviewing our partners’ policies and mechanisms across six key areas: ethics, governance, human resources, finance, operations, and partnership management. Findings are translated into corrective action plans to address identified risk areas and others that may require improvement. By the end of March 2025, we will have conducted over 50 due diligence assessments, and plan to roll out a tailored due diligence framework for commercial farms.

Through our farm-level Standard, we also promote meaningful stakeholder engagement with community members and other relevant local actors to collaboratively assess and address sustainability issues. This means working together with our partners and farming communities in vital areas such as natural resource management and labour rights improvements.

Better Cotton, alongside many other credible Voluntary Sustainability Standards, remains a key partner to guide and enable enhanced responsible business conduct in line with international frameworks, including the UNGP and the OECD’s Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. Voluntary or mandatory, Omnibus or not, it does not matter: supporting companies’ due diligence efforts will remain at the heart of our mandate.

What’s Next?

• The European Parliament and the Council of the EU need to appoint committees to lead on the proposals and agree on their respective negotiating positions
• Once the committees are appointed, trilogue discussions and negotiations between the European Parliament, the Council, and the European Commission will begin. Many say these are expected to be fast-tracked with limited opportunity to engage with policymakers
• The vote on the postponement is planned to take place tomorrow (1 April 2025)

[1] Covering only companies with over 1,000 employees – instead of previously EU firms of 250 employees as well as non-EU companies with a significant presence in the EU market – and either €50 million in net annual turnover or €25 million in total assets

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