Navigating the EU Omnibus: Why Traceability and Transparency Remain Essential

The Omnibus Simplification Package introduced by the European Commission aims to enhance EU competitiveness by revising key policies such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). While these changes reduce regulatory obligations for many companies, they do not eliminate the need for robust traceability and transparency. Businesses that continue to invest in supply chain visibility will remain ahead of regulatory shifts, mitigate risks, and strengthen stakeholder trust. 

The Omnibus Directive: Shifting Regulatory Priorities

The Omnibus Directive aligns with the Competitiveness Compass, an EU initiative launched in January 2025 to balance sustainability, innovation, and business growth. While the Directive reduces immediate compliance burdens, it does not lessen the market demand for credible and verifiable sustainability data. Companies that continue to strengthen their supply chain traceability will be in the best position to comply with evolving regulations and meet investor and consumer expectations. 

The Omnibus Directive is being rolled out in three phases: 

• First Package: Revises sustainability reporting obligations (CSRD, CSDDD) and redefines mid-cap companies. 

• Second Package: Streamlines compliance requirements, particularly documentation for mid-cap firms. 

• Third Package: Simplifies investment reporting requirements, aligning with revisions to the Sustainable Finance Disclosures Regulation (SFDR). 

Despite these changes, the core need for visibility across supply chains remains. Companies that proactively collect and manage traceability data will not only ensure long-term compliance but also be better equipped to respond to shifting regulatory landscapes, stakeholder expectations, and sustainability commitments. 

What’s Changing in the Corporate Sustainability Due Diligence Directive (CSDDD)? 

The CSDDD revisions reduce mandatory compliance obligations, but they also highlight the growing importance of voluntary corporate accountability. Under the Omnibus proposal:  

• Due Diligence Now Limited to Direct Suppliers – Companies are required to assess only their direct business partners. However, businesses will still need a structured traceability system to detect and manage risks in deeper supply chain tiers when concerns arise. 

• Extended Compliance Deadlines – 

• • Member States must transpose CSDDD into national law by July 2027. 

• • Large companies now have until July 2028 to comply. 

• Reduced Monitoring Frequency – Companies will only need to review due diligence processes every five years instead of annually. Yet, real-time supply chain visibility will remain critical to identifying emerging risks and maintaining credibility with stakeholders. 

• No EU-Wide Penalty Cap – National authorities will determine penalty levels, increasing regulatory uncertainty. Companies with strong traceability and compliance systems will be better prepared to demonstrate responsible business conduct and avoid penalties. 

• Climate Transition Plan Weakened – While companies must adopt a climate mitigation plan, they are no longer required to implement it. This increases the risk of greenwashing, making verifiable sustainability data and supplier engagement even more crucial. 

• Narrowed Stakeholder Definition – The directive now only includes employees, trade unions, and directly impacted communities. However, supply chain risks often extend beyond direct stakeholders which means that companies with transparent traceability systems will have the data to address these risks proactively. 

• EU-Wide Civil Liability Removed – Without standardized civil liability rules, enforcement will vary by country. Companies that maintain traceability and transparent reporting practices will be better positioned to demonstrate compliance and defend against legal claims. 
  

Why this matters

Although compliance deadlines are pushed back, the market demand for credible ESG data and proof of responsible business practices remains. Investors, consumers, and regulators still expect transparency. Companies that delay action on due diligence and traceability risk losing competitive ground. 

Check out the Due Diligence Framework which we have put together in the guide, Labor in Supply Chain Compliance.

What’s Changing in the Corporate Sustainability Reporting Directive (CSRD)?

CSRD revisions reduce the number of companies required to report on sustainability, but they do not reduce the need for supply chain data. The key changes include: 

• Higher Employee Thresholds – The CSRD scope now only applies to companies with 1,000+ employees, removing many smaller businesses from reporting obligations. 

• Higher Non-EU Company Threshold – Companies outside the EU now need €450 million in EU turnover to be subject to CSRD. However, even companies below this threshold will still face data demands from business partners that must comply. 

• Reporting Delays – Large companies now report in 2028 for FY2027, giving businesses more time to prepare. But waiting to act increases risks—companies that build traceability systems now will be better equipped when stricter requirements return. 

• Sector-Specific Reporting Standards Removed – This reduces mandatory reporting complexity, but it also puts the burden on companies to define their own sustainability commitments—those with strong traceability and transparency mechanisms will lead the way. 

Why this matters

The demand for sustainability data is not going away—it is shifting from mandatory compliance to voluntary market-driven accountability. Investors, customers, and NGOs will continue to scrutinize how brands manage their supply chains, whether or not reporting is legally required. 

The Business Case for Traceability and Transparency

The Omnibus Directive reduces immediate compliance pressure but does not eliminate the need for supply chain transparency. Instead, it places greater responsibility on companies to self-regulate and provide credible sustainability data.  

• Supply Chain Risks Remain – Weak regulations do not prevent human rights abuses, deforestation, or environmental harm from occurring. Companies that fail to map their supply chains and identify risks may still face legal, financial, and reputational consequences. 

• Market Expectations Are Higher Than Regulatory Requirements – Leading brands and financial institutions continue to demand granular, verifiable sustainability data from their suppliers. Companies that lack traceability systems may be excluded from key partnerships. 

• Future Regulations Are Uncertain – Today’s regulatory rollback does not mean sustainability laws won’t return in a stricter form. Companies that maintain transparent supply chains will be better prepared for future regulatory shifts. 

What's next?

Although the Omnibus Directive is still under negotiation, businesses should continue preparing for a world where traceability and sustainability data remain essential. 

Key Implementation Deadlines 

• CSDDD 

• • July 2027: Member States transpose the directive into law. 

• • July 2028: Applies to companies with 300+ employees and €900 million turnover. 

• CSRD 

• • 2026: Adoption of assurance standards for sustainability reporting. 

• • 2028: First reporting year for large companies (FY2027). 

How companies can stay ahead

1. Strengthen supply chain traceability – Even if reporting obligations decrease, having real-time supply chain visibility remains critical.
2. Ensure access to primary data – Investors and consumers still expect verifiable sustainability claims.
3. Prepare for future regulations – Compliance frameworks will evolve. Companies that invest in traceability now will be ready for stricter requirements.
4. Engage suppliers – Sustainability is a collective effort. Work closely with suppliers to improve data accuracy and alignment on sustainability goals. 
   

Conclusion: Traceability Is a Competitive Advantage 

The Omnibus Directive weakens short-term reporting obligations, but it does not remove the pressure for corporate transparency. Companies that proactively build robust traceability and compliance systems will maintain credibility, reduce risks, and be better prepared for future regulatory shifts. 

Rather than seeing these changes as a reason to scale back sustainability efforts, businesses should see them as an opportunity to lead—by demonstrating real supply chain accountability and proving their impact, even when regulations don’t demand it.