- The European Commission’s recently published Omnibus package aims to ‘simplify’ key EU sustainability rules, including the Corporate Sustainability Due Diligence Directive (CSDDD)
- Some proposed changes to this important corporate accountability law would limit large EU companies’ due diligence obligations to ‘direct business partners’, or the first tier of their supply chains. Companies with fewer than 500 employees will also be shielded, with restrictions on the information that can be requested from them
- This proposal could exempt large companies from the responsibility to look into and prevent harmful impacts deeper in their supply chains. Earthsight’s previous investigations have found that environmental harms and human rights abuses often occur at the point where commodities are produced – several tiers removed from a European retailer’s direct suppliers
- Our 2024 Fashion Crimes report documented land grabbing, illegal deforestation, violence and corruption in Brazilian cotton production and traced this cotton to suppliers of fast fashion giants Zara and H&M. In 2022, we published There Will Be Blood, which examined how soy linked to the repression of an Indigenous group in Brazil made its way into the supply chains of several European supermarkets. In both cases, European retailers were complicit in wrongdoing through their indirect business partners
- The proposed amendments could effectively defeat the purpose of the CSDDD, letting companies off the hook for environmental and human rights abuses linked to their operations
- The proposal will be debated by both the European Parliament and Council who must apply the brakes and resist the Commission's misguided approach, which is clearly being driven by corporate interests
In November 2024, European Commission President Ursula von der Leyen unveiled plans to revise several laws under the European Green Deal through a proposed Omnibus package.
The term ‘omnibus’ refers to something that covers many elements at once. In lawmaking, an omnibus package brings together several legislative changes into a single proposal and is passed as one measure.
This omnibus package amends four laws relating to corporate sustainability at once. The Commission has announced there will be several more omnibus packages to come.
The recently published Omnibus package ostensibly aims to revise and ‘simplify’ several key EU sustainability laws, including the Corporate Sustainability Due Diligence Directive (CSDDD). While the European Commission presents these changes as an effort to streamline regulations and improve efficiency, the proposed amendments, if adopted, would take an axe to corporate accountability.
One of the most concerning amendments is the proposal to limit a company’s due diligence obligations to ‘direct business partners’ – a change that appears minor but has enormous implications. A company’s ‘direct business partner’ could be a business with which it has a commercial agreement or from which it sources goods – essentially a first-tier supplier in its supply chain.
As the directive currently stands, companies need to understand the risks of adverse impacts occurring throughout their ‘chain of activities’, both upstream and downstream.1 Under the proposed amendments, companies would only be required to look in depth at their direct suppliers, unless they have ‘plausible information’ suggesting that negative impacts could occur within the operations of an indirect supplier (i.e. further up their supply chains).
If a direct supplier has less than 500 employees, the Omnibus amendments limit the information it needs to provide to a smaller set of questions in the Voluntary Sustainability Reporting Standard.
'To many, it feels like the European Commission is accelerating a bus off a cliff without knowing if the brakes even work – hastily rushing to dismantle hard-fought regulatory standards for the benefit of corporate interests without fully considering the consequences.'
Flags of the European Member States outside the European Parliament, Brussels © Shutterstock
A small amendment with massive consequences
In practice, many large companies rely on sprawling supply networks, often stretching across continents and involving multiple layers of indirect business partners. These indirect partners play key roles in production, distribution or sourcing but may not have a commercial agreement with the large company at the end of their supply chain. Earthsight’s investigations into sectors such as fashion, agribusiness and timber show that human rights, environmental and governance issues frequently arise at the origin farm or production site level. These operations are often several tiers removed from a European retailer’s direct suppliers. If companies are only required to look one link deep, the riskiest parts of global supply chains would likely remain invisible to regulators and consumers.
Without clear, enforceable requirements for companies to conduct due diligence across their entire value chain, the CSDDD risks becoming little more than a box-ticking exercise.
Case study 1: Tainted cotton and the fashion industry
Earthsight’s Fashion Crimes report, published in 2024, linked cotton used by fast fashion giants Zara and H&M to a series of environmental and human rights abuses in Brazil’s Cerrado biome. These include large-scale deforestation, land grabbing, and violent conflicts with traditional communities.
The investigation traced cotton from two Brazilian agribusinesses – Horita Group and SLC Agrícola – to clothing manufacturers in China, Vietnam, Indonesia, Turkey, Bangladesh and Pakistan. Eight of these manufacturers, including Pakistan-based Interloop, were found to be using this cotton in garments supplied to H&M and Inditex, Zara’s parent company.
© Earthsight
Interloop shipped around 30 million pairs of cotton socks to H&M stores across Europe and the United States in 2023, alongside 350,000 pairs of women’s denim jeans to Inditex. Pakistani import records show that between 19 and 42 per cent of Interloop’s raw cotton that year originated from Horita and SLC.
The companies deny any wrongdoing. Their full responses can be found here.
© Earthsight
Based on their annual financial statements, both Inditex (Zara’s parent company) and the H&M group (H&M’s parent company) exceed the CSDDD thresholds, with over 1,000 employees and a net global turnover exceeding €450 million.2 Interloop, SLC Agrícola and Horita Group are likely not in scope of the CSDDD, as their net turnover in the EU is expected to be below the required threshold.3,4
If the CSDDD were to be applied in its current form, Inditex/Zara and H&M would need to monitor not only their direct suppliers but also the activities of companies across their supply chains, including indirect suppliers Horita Group and SLC Agrícola. Effective due diligence would expose the human rights abuses and environmental harms occurring at the farm level, such as the violence against traditional communities. Inditex/Zara and H&M would need to examine and address the risks in this part of their supply chains and take action to prevent or address harms.
The proposed amendments to the directive could significantly narrow this responsibility. If Inditex/Zara and H&M only need to look at their direct suppliers, they would no longer be required to conduct due diligence on Horita Group or SLC Agrícola, with whom they are very unlikely to have direct contracts. As a result, due diligence would likely be limited to their immediate suppliers – such as Interloop. But because Interloop is based outside the EU, it is unlikely to have any due diligence obligations under the CSDDD. In practical terms, this would mean that H&M and Zara would be exempted from having to rid their cotton supply chains from the environmental and human rights abuses uncovered in our investigations.
Earthsight’s report identified seven other companies sourcing cotton from Horita and supplying products to Zara and H&M. All seven companies are also based outside the EU.
Cotton harvesting in São Desidério, Bahia, Brazil © Thomas Bauer / Earthsight
Case study 2: Tainted soy and pet food
The Omnibus amendments also propose to limit the amount of information that a company covered by CSDDD can seek from its direct business partners with fewer than 500 employees. Another Earthsight case study shows why this too is dangerous.
A 2022 joint investigation by Earthsight and De Olho nos Ruralistas revealed how some of Europe’s best-known retailers were linked to the ongoing repression of an Indigenous group through their soy supply chains. The soy farm in question, Brasília do Sul, belongs to an influential family and sits on Takuara, the sacred land of a Guarani Kaiowá community that was forcibly evicted to make way for agribusiness expansion. The Guarani Kaiowá’s attempts to regain access to their traditional lands have been met with brutal violence, government inaction, unfriendly courts, and the interests of a powerful agribusiness lobby. Kaiowá leader Marcos Veron was killed while trying to lead his people back to Takuara.
Cross at Takuara marking the burial site of Kaiowá leader Marcos Veron
Our investigation found that Brasília do Sul sold soy, a key ingredient in chicken feed, to Brazil’s fourth largest chicken producer, Lar Cooperativa Agroindustrial. Lar supplied chicken to European buyers, including Germany’s Paulsen Food. Paulsen, in turn, supplied poultry products to pet food manufacturers Saturn Petcare and Animonda Petcare, both owned by Heristo. These brands produce pet food sold in major European supermarkets, including Lidl, Aldi, Netto, and Edeka.
The companies deny any wrongdoing. Their full responses can be found here.
In this example, Heristo – and its subsidiaries Saturn Petcare and Animonda Petcare – would be restricted in what information they can obtain from Paulsen Food, which sources chicken from Lar Cooperativa Agroindustrial, as it only has 38 employees. The rest of the companies in the supply chain would also be out of scope as they are not direct suppliers.
This is not an isolated example: recent analysis by SOMO estimates that only around 9 per cent of direct suppliers to seven major European supermarket chains – including Lidl and Aldi – will be covered by the CSDDD.
While the Commission frames these changes as merely efforts to reduce administrative burdens, the reality is that they would strip the directive of its effectiveness, shielding bad actors from responsibility and making meaningful enforcement practically unworkable.
Weak safeguards in the proposal are not enough
The Commission’s proposal includes several nominal safeguards to address the consequences of limiting due diligence to direct suppliers. A new paragraph 2a requires companies to conduct an in-depth assessment if they have ‘plausible information’ suggesting harmful impacts from an indirect business partner’s operation. While this requirement sounds promising, in our experience, companies rarely act on this information or take adequate steps to address the issue.
Earthsight’s investigations have repeatedly shown that businesses continue to work with suppliers (direct or indirect) involved in environmental or human right abuses, despite having information about such abuses.
The new paragraph 2a effectively shifts the burden onto NGOs or communities to pressure companies into taking responsibility, rather than requiring companies themselves to take the initiative to investigate their own supply chains. Meanwhile, the Commission’s proposal removes the ability of NGOs to take legal action against companies on behalf of those negatively impacted by their operations. This will limit civil society’s ability to hold companies accountable for violations in their supply chains, making it even harder to address corporate failures.
The amendments include another seemingly promising safeguard, stating that companies must always carry out an assessment where an indirect relationship with a business partner is an artificial arrangement that could circumvent due diligence obligations. However, in practice, proving that a business relationship is “artificial” is extremely challenging. There are myriad reasons why a company may structure its relationships in a particular way and most companies are not transparent about the specifics of their business arrangements. It also seems unlikely that a company would voluntarily disclose an artificial relationship in its supply chain. While this safeguard is well-intentioned, it is likely to be impossible to enforce.
All this is exacerbated by another proposed change: companies would no longer be required to review due diligence obligations annually. By extending the review period to five years, companies can continue business as usual without regularly assessing or updating their due diligence processes, leaving substantial room for harm to persist unnoticed and unaddressed.
'While the Commission frames these changes as merely efforts to reduce administrative burdens, the reality is that they would strip the directive of its effectiveness, shielding bad actors from responsibility and making meaningful enforcement practically unworkable.'
European Commission building in Brussels, Belgium © Shutterstock
EU lawmakers must apply the brakes on the Omnibus
The current version of the CSDDD was narrowly passed, and any weakening of it through the Omnibus amendments would render the directive far less effective in addressing environmental harm and human rights abuses in global supply chains.
On 23 April, Members of the European Parliament held their first discussion on the Omnibus amendments. While two of the progressive parties – The Greens and Socialists & Democrats – warned that limiting due diligence to direct suppliers would weaken the directive, the conservative European People’s Party (EPP), the largest group in Parliament, supported the amendment. Representing member states, the Council of the EU’s draft position largely supports the amendment. The Council has also proposed to limit the information that can be requested from companies with fewer than 1,000 employees, rather than 500.
The EPP and the Council must take another look at these damaging amendments. They must advocate for all tiers of a company’s value chain to be subject to robust due diligence, recognising that a focus solely on direct suppliers creates a cascade of exemptions.
The implication of the Omnibus proposal is that companies would have less incentive to ensure responsible operations throughout their supply chains and stop their complicity in harmful practices. This leaves communities and ecosystems vulnerable to exploitation, as they are now, and undermines the very purpose of the CSDDD: to hold companies accountable for their global impact.
If EU lawmakers opt for convenience over accountability, they will not merely be diluting key corporate accountability laws – they will be institutionalising complicity and legitimising the very abuses the CSDDD was designed to address.
1 Note that the CSDDD text excludes from the scope of downstream business partners’ activities the distribution, transport, and storage of products subject to export controls under Regulation (EU) 2021/821, or relating to weapons, munitions, or war materials, once export has been authorised.
2 Inditex group’s 2024 annual report: https://www.inditex.com/itxcomweb/api/media/604197b9-50de-4f4f-ab84-c1e379cb3fd0/Inditex_Group_Annual_Report_2024.pdf?t=1741989136588
3 H&M group’s 2024 annual report: https://hmgroup.com/wp-content/uploads/2025/03/HM-Group-Annual-and-sustainability-report-2024.pdf
4 Interloop’s 2024 Annual Report: https://investors.interloop-pk.com/wp-content/uploads/2024/10/Interloop-Annual-Report-2024-HD.pdf
4 SLC Agricola’s 2024 Annual report: https://api.mziq.com/mzfilemanager/v2/d/a975c39b-3eca-4ad8-9330-2c0a0b8d1060/3d0f29c6-ba25-9ba0-d78c-64b0154a87d2?origin=1
4 The Horita Group’s annual report is not publicly available, but they are Brazil’s sixth largest cotton producer: https://www.estadao.com.br/economia/coluna-do-broadcast-agro/coluna-broadcast-agro-grupo-horita/
