In effect July 2024, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) marked a shift in corporate accountability, mandating companies to address human rights abuses, environmental harm, and unethical practices across their supply chains.
The CSDDD required businesses to impose strict supply chain oversight to manage ESG risks. It also carried high compliance penalties of up to 5% of global turnover, amounting to billions in fines annually.
However, in February 2025, the European Commission introduced the Simplification Omnibus, rolling back some of the reporting guidelines introduced in the original package. While this will streamline reporting and ease administrative burden, it will also introduce new compliance challenges.
The Commission projects €6.3 billion in savings, but the regulation weakens transparency and accountability in corporate sustainability.
Large companies operating in and with the EU now face increased regulatory uncertainty, with vague and inconsistent penalties across member states. These unclear penalties complicate risk assessments and discourage investment in due diligence, ultimately creating a riskier threat landscape.
While reduced compliance penalties may seem like a relief, these won’t protect companies from swift market backlash in the event of ethical failures. Even in its simplified form, the Omnibus and CSDDD still emphasize proactive risk management—not just for compliance, but to mitigate broader, market-driven risks.
Key Changes Under the Simplification Omnibus
The Simplification Omnibus rolls back many CSDDD guidelines, especially for smaller firms. Key updates include:
- Implementation postponed to mid-2028
- Removal of the 5% global turnover penalty, with enforcement delegated to individual EU member states
- Due diligence requirements focus primarily on direct suppliers rather than entire value chains
- Assessment frequency reduced from annual reviews to evaluations every five years
Despite simplifications, market expectations remain unchanged—investors, consumers, and stakeholders continue to demand transparency and responsible supply chain management.
Supply Chain Complexity Demands Robust Oversight Despite Regulatory Simplification
Global supply chains are increasingly complex, with interdependencies spanning continents and industries.
For example, a single smartphone contains components from over 40 countries. This complexity creates significant visibility challenges, with 65% of procurement leaders lacking supplier visibility and transparency.
The EU’s Simplification Omnibus focuses due diligence on direct suppliers, easing administrative burdens. However, this shift places more responsibility on businesses to implement proactive risk management. As ethical supply chain expectations rise, companies must go beyond basic compliance to protect their operations and reputations.
Supply Chain Resilience Starts with Strong Governance, Continuous Monitoring, and CSDDD Compliance
While the Simplification Omnibus reduces administrative burdens and centralized penalties, its announcement does not diminish the importance of robust supply chain governance. Supply chain failures pose significant risks, with 98% of organizations affected by data breaches alone.
Real-time monitoring systems are essential to identify and mitigate risks, safeguarding firm’s investments and reputation. Companies investing in advanced monitoring and supply chain governance consistently outperform their peers, with 7-10% higher shareholder returns during disruptions.
Vcheck’s Continuous Monitoring Platform leverages real-time web crawling to help companies identify and mitigate third party and supply chain risks in real time. The solution scans derogatory news, criminal records, political exposure, and sanctions and enforcements to help businesses to make informed decisions about third parties.
Contact Vcheck to learn how our third-party vetting and continuous monitoring solutions enable CSDDD compliance and support strong supply chain governance.