Investors could be permanently exempt from the European Union’s Corporate Due Diligence Directive (CS3D), according to leaked plans from the European Commission.
The law, which currently seeks to hold firms with significant operations in Europe responsible for environmental and human rights breaches in their global supply chains, is being revisited as part of efforts to make EU rules less burdensome for businesses in the region.
Draft proposals for the so-called ‘omnibus package’, which will revise CS3D and two key sustainability disclosure laws, have been leaked ahead of their scheduled publication date on Wednesday.
They suggest that the Commission plans to scrap its commitment to consider adding financial institutions’ downstream activities into CS3D in the next few years.
Financial services and investment activities were carved out of the final legal text during dramatic last-minute negotiations back in 2023.
It was argued that banks and investors were less able to conduct due diligence on their holdings, in part because of the frequency with which they bought and sold certain types of securities.
However, the final agreement included a provision requiring the Commission to submit a report to the European Parliament and Council exploring the need to add the finance sector in fully before the end of the decade.
According to the documents circulating, this commitment would be removed from the law.
Other major proposals included in the leaks – which are partial and subject to change over the coming days – include a major reduction in the number of companies covered by the Corporate Sustainability Reporting Directive (CSRD).
According to the drafts, the Commission wants to raise the thresholds so that only companies with more than 1,000 employees and €450m in turnover would be mandated to publish sustainability information.
Currently, CSRD applies to firms with more than 250 employees and €40m in turnover.
The revisions, if successful, would bring CSRD in line with CS3D, removing all SMEs from their scope.
The Commission looks set to preserve the EU’s ‘double materiality’ approach, meaning the disclosure rules would still capture environmental and social impacts, rather than just business risks and opportunities.
The only proposals that have not been leaked so far are those relating to the Taxonomy Regulation, but if the suggested reforms to CSRD were approved, it would automatically slash the number of companies required to report taxonomy data.
The Commission is scheduled to present and discuss the final legislative proposal for the omnibus package on Wednesday, but it is widely understood that this could be delayed until March.
A Commission spokesperson told IPE the timetable was “indicative” and subject to change.
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