Leaked proposed legislation seeks to significantly scale back EU due diligence laws

A draft law from the new European Commission, expected tomorrow, will propose significant cuts to the European Union’s human rights and environmental reporting obligations, according to a section of the upcoming omnibus legislation obtained by POLITICO.

The legislation aims to scale back three of the bloc’s major legal frameworks affecting businesses, including the corporate sustainability due diligence directive (CSDDD), which requires them to investigate and address human rights and environmental abuses in their global supply chains. If approved, a large cohort of businesses could be exempt from complying with corporate sustainability reporting rules, bringing only the largest companies under the regulations, the leaked document shows. Requirements to monitor environmental and human rights abuses throughout companies’ global supply chains, meanwhile, could be considerably reduced.

The original due diligence law — passed in 2024 and only due to be implemented incrementally from 2027 onwards — requires companies to look deep into their supply networks to identify and act on activities that harm the environment and violate human rights. However, the proposed revisions significantly scale back and weaken these measures across various areas. For instance, companies would no longer have to look beyond suppliers with which they have a direct business relationship, would only be expected to monitor suppliers once every five years – down from annually – and would no longer be forced to terminate relationships with suppliers which fail to improve their behavior. Additionally, the revisions would prevent countries from adopting stricter laws, setting maximum harmonization across the EU that limits national flexibility.

Other key rollbacks include weakened stakeholder rights, restricting engagement to those “directly” affected and excluding national human rights institutions and environmental NGOs. Climate plan requirements would be watered down – companies would need to draft plans but not necessarily implement them. Enforcement mechanisms would also be weakened, with the removal of minimum penalties and civil liability left to national discretion, potentially allowing member states to exclude liability entirely. Financial institutions would escape further due diligence obligations and, finally, delays in implementation are expected, with key guidance pushed to mid-2026.

European Commission President Ursula von der Leyen had previously trailed the legislation, announcing in November that, in order to improve EU competitiveness, she would reduce reporting requirements for companies by 25 per cent and introduce an omnibus proposal that could weaken the CSDDD and other corporate sustainability reporting and classification laws adopted during her first mandate leading the commission.

Civil society organizations warned that such a bill could act as a “Trojan horse” for political groups opposed to the law to remove important climate and human rights provisions from the CSDDD once back in parliament, calling for the EU to show leadership in the protection of human rights, the environment and climate, and for the Commission to clarify its intentions. Meanwhile Human Rights Watch (HRW) said the EU should instead “look to create a human rights economy, where it would be responsible for prioritizing the long-term greater interest of people and the planet through equitable distribution of resources and environmental sustainability over maximization of profits for the benefit of a few.” It added that, “…instead of revisiting these essential laws, the European Commission and member states should work to integrate them into national law and enforce them. The EU should encourage a race to the top to protect human rights, the environment, and climate, all while providing companies with a level playing field through clear expectations, legal certainty, and timely and comprehensive guidelines on implementation.”

HRW also pointed out that, while company lobbyists and conservative politicians argue that compliance costs and reporting obligations are too expensive and stifle businesses, data shows that the cost of due diligence for large companies is less than 0.01 per cent of their revenue while, between 2016 and 2023, the largest listed EU-based companies made enough profit to distribute US$1.501 trillion to their shareholders.

Once out, the proposed amendments will require approval from member countries in the Council of the EU and from lawmakers in the European Parliament.

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