February 2025
Less reporting, more risk?
Why EU’s Omnibus will heighten, not diminish, the need for increased supply chain due diligence
# Regulatory simplification is coming, but the risks aren’t going anywhere. As the EU moves to simplify sustainability reporting rules, businesses must decide: follow the rules, or stay ahead of them?
Alexandra Mihailescu Cichon, Chief Commercial Officer and spokesperson
Alex's take
‘The need to simplify sheds light on the limits of reporting – over 1,000 indicators under CSRD are excessive, to say the least. Our clients tell us they’re so busy with reporting that they lack time for activities that drive real business impact. While reports have their merit, smarter, less burdensome solutions exist. Instead of surveying thousands of suppliers, companies can focus on those posing real risks by leveraging timely data from public sources to monitor their supply chains around the clock.’
‘Compliance reporting is inherently backward-looking and can become a tick-the-box exercise. Due diligence and risk management, on the other hand, are forward-looking. Compliance is a must-have, but it’s not a natural driver of competitiveness. Smart risk management is – and that’s what the CSDDD is really about. Investors and companies can sharpen their edge now by leveraging data-driven solutions for supply chain due diligence and risk monitoring.’
‘CSDDD, however, is a different story. Unlike CSRD, which focuses on reporting, CSDDD is about action – identifying, assessing and mitigating environmental and social risks. Weakening it in the name of competitiveness would be short-sighted. By practicing proper due diligence and risk management, organizations enhance resilience and safeguard against reputational damage.’
# I. Omnibus unpacked: simplification or setback?
On February 26, the European Commission unveiled its Omnibus package on sustainability.1 The initiative aims to streamline corporate sustainability reporting by addressing concerns over regulatory complexity and compliance costs. The initiative is part of the EU’s broader strategy to enhance competitiveness by reducing administrative and reporting burdens on companies by at least 25% and 35%, respectively, for small- and medium-sized enterprises (SMEs).
At its core, the Omnibus package seeks to simplify key sustainability frameworks, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD standardizes ESG disclosures, while the CSDDD extends corporate responsibilities beyond reporting to include proactive due diligence and risk management across supply chains. By consolidating adjustments to these regulations in a single legislative package, the Omnibus aims to maintain the EU’s leadership in sustainability while addressing industry concerns about red tape hindering investment and innovation.
The regulatory overhaul aligns with recommendations from the Draghi Report2 and the EU’s Competitiveness Compass3, both of which emphasize the need to balance sustainability goals with companies’ ability to stay competitive, innovative and prosperous. However, as policymakers finalize the details, debates persist over whether these changes will lead to meaningful simplification or downright deregulation.
# II. Businesses push for clarity while investors warn against dilution
The proposed Omnibus Simplification package has sparked mixed reactions among businesses and investor groups. At the forefront are concerns about regulatory uncertainty. While many companies and financial institutions support efforts to streamline sustainability reporting, there is widespread unease that reopening discussions on established regulations could undermine policy stability and investment confidence.
A coalition of investors with a combined USD 6.8 trillion in assets, including Eurosif, IIGCC and PRI, have expressed conditional support for targeted refinements that enhance clarity and consistency.4 However, in an open letter sent to the European Commission4, the investor groups caution against any fundamental weakening of the CSRD, CSDDD, and the EU Taxonomy. These frameworks, the letter states, are critical for informed investment decisions as they enable financial markets to accurately assess ESG risks. Structured, digital reporting, the coalition maintains, enhances transparency and helps European companies secure funding, which gives EU firms a competitive edge in capital markets.
Meanwhile, a group of major multinationals – including Unilever, Nestlé, Mars, and Primark – has called for public assurances that the Omnibus process will not lead to the renegotiation of existing laws, arguing that their clients demand sustainability and that businesses have already invested heavily in compliance. In an open letter to European Commission leaders, the group insists that long-term competitiveness depends on regulatory certainty and stable sustainability rules.6
# III. Due diligence isn’t a burden – it’s an advantage
While businesses are concerned about regulatory uncertainty, the real risk with Omnibus is the weakening of due diligence mandates in the name of competitiveness. The CSDDD, in force since July 2024, marks a major regulatory shift as it compels companies to take responsibility for their environmental and social impact. Large firms must actively monitor supply chains and engage with suppliers to address risks. Weakening these requirements in the name of competitiveness would be shortsighted. Regardless of the outcome of the Omnibus (and other related discussions), the need for transparency, accountability, and strategic risk management remains. Financial institutions and investors will continue to demand transparency. As regulatory frameworks loosen, the need for companies to proactively manage risks in their supply chain will only increase.
Simplifying rules doesn’t make risks disappear. The data indicates that risk exposure is only growing, making data-driven risk monitoring crucial. Ultimately, supply chain due diligence isn’t just about compliance – it’s about building resilience. Forward-thinking companies and investors protect their operations, reputation, and long-term stability by proactively monitoring business conduct risks across their investments and supply chains.
# IV. Uncovering supply chain risks: data-driven insights
ESG data providers like RepRisk bridge the gap between regulatory compliance and proactive ESG risk management. Using AI and expert human analysis, RepRisk scans over two million documents daily from 150,000+ public sources and stakeholders in 23 languages, systematically identifying any company or project associated with a business conduct risk incident.7 RepRisk data generated from public sources holds a clear edge over data sourced from company reports due to its relevant coverage, speed, and reliability.
RepRisk captures supply chain risks by intersecting two issues: The cross-cutting issue Supply chain and any of the 28 ESG Issues within the research scope.8 While not all flagged incidents constitute legal violations of regulations, they still pose significant reputational risks.
Between 2020 and 2024, the most common environmental issue linked to Supply chain was Impacts on ecosystems and biodiversity (dropping from 43% in 2020 to 35% in 2024). Local pollution remained steady at around 18%, while Climate change, GHG emissions, and global pollution rose by six points to 17%, becoming the third most frequently reported concern.
# Biodiversity loss remains the most pressing environmental risk to supply chains
With regard to social issues, Poor employment conditions and Occupational health and safety issues together accounted for 45% – 52% of supply chain-related incidents over the past five years. Human rights abuses and corporate complicity remained at around 20%, while reports of forced labor in supply chains increased by 2% and child labor by 1%.
# Human rights risks in supply chains stay high, with forced and child labor on the rise
In recent years, European companies have faced a growing number of risk incidents related to forced and child labor within their supply chains. Between July 2023 and June 2024 alone, a record number of 292 companies have been directly exposed to such issues. Notably, private entities face substantial risks, with 56% of these incidents reported within the supply chains of private European companies.
# Mapping supply chain risk by headquarters location across the globe
As shown in the image above, risk incidents are globally distributed, highlighting the widespread nature of labor risks linked to European businesses. European companies are twice as likely to face labor-related issues in Asia as they do in their home region. This prevalence underscores Asia's central role in global supply chains and its associated vulnerability. After Asia and Europe, Africa and Latin America and the Caribbean are the next two most frequently impacted regions, highlighting the extensive reach of European companies' supply chains and the associated risks.
# Mapping supply chain risk by incident location across the globe
# V. A partner beyond compliance
Clearly, ESG risks in supply chains aren’t going away. The objective of the CSDDD – proactively managing supply chain risks – remains very pertinent. However, instead of overwhelming companies with complex reporting requirements, simplifying processes could free up capacity for companies to concentrate on due diligence that drives real change. Businesses shouldn’t be weighed down by compliance exercises but empowered with data-driven tools that drive real impact.
Yes, complying with EU laws is a priority. And yes, delays and uncertainty from the Omnibus pose risks of their own. But businesses shouldn’t wait for regulatory clarity. They should embrace data-driven risk assessment – not just to keep up with ever-changing rules, but to boost performance and protect their reputations.
Less regulation doesn’t mean lower risks – just less guidance. As regulatory frameworks evolve, supply chain due diligence and risk monitoring will only grow in importance. Businesses and investors who act now – leveraging timely data to detect risks quickly – will remain competitive and resilient.
Get in touch
Supply chain risks are tied to financial, compliance, and reputational risks. To learn how our data can strengthen your due diligence and risk management, reach out to your RepRisk account manager or email us at contact@reprisk.com.
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