Navigating a changing regulatory landscape on corporate sustainability – what you need to know about EU’s sustainability due diligence requirements after the Omnibus proposal

March 8, 2025

The European Commission’s “omnibus package” proposed simplifying and slightly narrowing the already adopted EU directives on corporate sustainability. Even so, large companies will still have extensive obligations to curb business generated adverse impacts on human rights and the environment.

On 25 July 2024, the Corporate Sustainability Due Diligence Directive (often abbreviated “CSDDD” or “CS3D”) entered into force. On 26 March 2025, the European Commission presented its “omnibus package” with the express purpose to cut red tape and lessen the regulatory burden on companies in order to boost EU competitiveness. The omnibus directive that was part of the package proposes to lessen the extent of certain obligations under CS3D.

Even as amended by the omnibus proposal, CS3D presents a uniform framework to address adverse human rights and environmental impacts originating from large companies’ own operations and from their global supply chains. The aim of CS3D is to protect workers and communities from child labor, forced labor, suppression of trade unions, environmental pollution, and other business-related abuses, while placing the burden for preventing such adverse impacts on large companies.

Companies that meet the relevant thresholds under the directive will be required to have comprehensive due diligence processes and to take “appropriate measures” to address adverse impacts on human rights and the environment arising out of business activities domestically and abroad. Non-compliance can result in various consequences, including regulatory investigations and inspections, liability to carry out remedial actions, and penalties imposed by supervisory authorities and civil liability.

Many companies will likely need to introduce new features in their ESG work and supply-chain risk assessments/due diligence in order to ensure compliance with CS3D. At the same time, growing pressure to ensure social sustainability and environmental awareness in global supply chains is also driven by social expectations and stakeholder demands. Taking the steps necessary to comply with CS3D may for certain companies have the benefit of enhancing reputation and mitigating risks associated with possible ESG scandals in its supply chains.

Phased schedule for application

EU member states are required to transpose CS3D into national law by 26 July 2027 according to the omnibus proposal, postponing transposition by one year. Relatively smaller in-scope companies are afforded a longer transition period. CS3D applies extra-territorially as it captures non-EU based companies with sufficient global revenue generated in the EU. The staggered application will progress as outlined below according to the omnibus proposal, postponing application to a category of larger companies that was originally proposed to take effect 26 July 2027.

CS3D imposes far-reaching obligations on in-scope companies

What are the business operations included in the scope for due diligence and other mandatory measures?

In-scope companies are required to address actual and potential adverse impacts on human rights and the environment arising from their own operations and from that of their subsidiaries, but also from their “chain of activities”. The definition of subsidiaries follows EU competition law.

The relevant chain of activities encompasses “upstream chain of activities” as well as “downstream chain of activities”.

  • A company’s “upstream chain of activities” include business partners providing e.g. design and manufacturing, or extraction and supply of raw materials, connected to the company’s production of goods or provision of services.
  • A company’s “downstream chain of activities” include business partners providing distribution, transport and storage services, where such activities are performed for or on behalf of the company.

What are the adverse impacts that are relevant for the obligations?

An “adverse human rights impact” under the CS3D is defined as an impact arising from abuses of human rights enshrined in certain international conventions that set forth prohibitions and obligations relating to e.g. labor and human rights. An “adverse environmental impact” is an adverse impact on the environment or other interests arising from violations of certain prohibitions and obligations in international conventions concerning the environment, including rules that relate to e.g. pollution, the use of hazardous chemicals or unlawful waste handling. The applicable international conventions, and the relevant prohibitions and obligations therein, are listed in an annex to the directive. CS3D notes that human rights and environmental violations can be linked to corruption and bribery. Companies will therefore need to integrate an anti-corruption and anti-bribery program to its CS3D compliance program.

What are the core obligations in relation to in-scope business operations and relevant adverse impacts?

The set of obligations that CS3D imposes mandates “appropriate measures” aimed at identifying and taking relevant action in relation to actual or potential adverse impacts, but also relates to self-assumed accountability, grievance handling and transparency.

CS3D requires in-scope companies to:

  • Adopt and integrate a “risk-based” approach to sustainability due diligence into relevant policies/risk management systems (Art. 5 and 7)
    • Regularly update due diligence procedures, including in the event of a “significant change”, such as starting operations in a new sector/geographic area, or changing corporate structure through mergers or acquisitions.
  • Identify and assess actual and potential adverse impacts on human rights and environmental matters and, where necessary, appropriately prioritize between them (Art. 8 and 9)
    • Under the omnibus proposal, full due diligence to the value chain beyond direct business partners are only required in where there is plausible information suggesting that adverse impacts have arisen or may arise at the level of indirect business partners.
  • Bring actual adverse impacts to an end or minimize their extent, and provide remediation to those affected by actual adverse impacts (Art. 10 and 12)
  • Prevent or mitigate potential adverse impacts (Art. 11)

CS3D does not require that companies completely avoid adverse impacts – it is rather meant to impose “obligations of means”. But where adverse impacts are identified, or should have been so through due diligence, “appropriate measures” to bring them to an end or mitigate impact will be required.

Furthermore, notification mechanisms and complaint procedures will be established, enabling the public to report concerns about adverse impacts and allowing affected parties to file complaints.

Public enforcement shall warrant compliance,  and civil liability shall ensure recourse for parties suffering damage as a result of a company’s failed compliance

Each member state shall designate a supervisory authority to monitor and enforce compliance with CS3D obligations, which will be empowered to carry out inspections and investigations. The supervisory authorities will also have the power to order a company to cease infringements of obligations by performing an action or ceasing certain conduct.

The national legislation transposing CS3D must set out penalties for breaches of the obligations under the directive. The precise levels of penalties are for the member states to determine, but they must be “effective, proportionate, and dissuasive”.

In addition to public enforcement, the member states must ensure that where a company fails to comply with its obligations under CSDDD, and where such failure caused damage to a legal or physical person, such person will be entitled to receive full compensation from the company in breach of its obligations.

In-scope companies are recommended to take proactive steps ensure compliance and to track CS3D developments as they unfold in coming years

Taking proactive measures to prepare for complying with CS3D may include to:

  • Conduct risk assessments to identify significant human rights and environmental risks within its own group’s operations or that of its upstream and downstream chain of activities, and to develop due diligence procedures to identify adverse impacts.
  • Prioritize identified risks based on severity and probability of adverse impacts.
  • Develop robust action plans that outline appropriate measures to be taken to manage potential or actual adverse impacts where they are identified.
  • Develop a governance structure with processes that enable implementation of such due diligence procedures, and execution of action plans when adverse impacts so require.
  • Identify key stakeholders and responsible internal departments for implementation of due diligence procedures and development and execution of action plans.
  • Reappraise contracts in its supply chain to ensure existence of contractual assurances and tools to require in-scope business partners to comply with human rights and environmental regulations and to demand the same from their suppliers.

It is advisable to follow the implementation of CS3D as it unfolds during coming years. The Commission is bound to issue guidelines on key features of the directive and how obligations can be met, already in July 2026 according to the omnibus proposal.  

Pending the Commission’s guidelines, the time for transposition of CS3D into national law is approaching. In Sweden, the Government in December tasked a special investigator to undertake an inquiry into how to implement the rules under CS3D, and to report on this by 16 December 2025. The starting point for the enquiry, pursuant to its instruction, shall be to implement the new rules into Swedish law at the minimum level required by the directive. Meanwhile, the Government of Finland has established a working group which is tasked to prepare a government proposal on what provisions need to be introduced in Finnish law for the transposition. It remains to be seen how the omnibus proposal affects national transposition.

Roschier continues to closely track the implementation of CS3D and the legislative process relating to the omnibus directive to assess how the new regulatory framework will impact our clients, and to be able to advise on complex legal issues arising in their transitioning. Please do not hesitate to reach out to the Roschier team if you have any questions or need advice.osely track the implementation of CS3D and the legislative process relating to the omnibus directive to assess how the new regulatory framework will impact our clients, and to be able to advise on complex legal issues arising in their transitioning. Please do not hesitate to reach out to the Roschier team if you have any questions or need advice.

Continue reading in Dagens Industri (In Swedish).