The European Union is considering easing corporate liability under its strictest ESG law, the Corporate Sustainability Due Diligence Directive (CSDDD). This move is part of a broader strategy to reduce regulatory burdens while maintaining ESG commitments. The European Commission is evaluating the extent to which companies should be held accountable for environmental and human rights violations within their supply chains. The review aims to balance corporate responsibility with economic competitiveness as part of an upcoming package designed to simplify ESG regulations. 

EU Commissioner Valdis Dombrovskis highlighted that the Commission is assessing how much influence companies should have over their value chains and to what extent they should be liable for third-party actions. Businesses operating in the EU have raised concerns that the current version of CSDDD exposes them to excessive legal risks, including potential fines of up to 5% of global revenue. On the other hand, environmental and human rights organizations argue that the directive sets a crucial benchmark for corporate responsibility in ESG compliance. 

The EU’s effort to reduce regulatory complexity comes as it seeks to remain competitive with global markets such as the US and China. The European Commission is set to present its first “simplification omnibus” on February 26, addressing multiple ESG regulations simultaneously. This package will review the CSDDD, the EU’s Taxonomy Regulation, and the Corporate Sustainability Reporting Directive. Additionally, adjustments to the EU’s Carbon Border Adjustment Mechanism (CBAM) are expected, with EU Climate Commissioner Wopke Hoekstra stating that 80% of companies could be exempt from CBAM requirements. 

These regulatory adjustments reflect the EU’s attempt to balance sustainability goals with economic growth. As ESG policies continue evolving, businesses must adapt their carbon neutral strategy to comply with shifting regulations while remaining competitive. The upcoming reforms will play a crucial role in shaping the future of ESG frameworks and corporate accountability in Europe. 

Sources: 

https://www.insurancejournal.com/news/international/2025/02/12/811722.htm  

https://www.bloomberg.com/news/articles/2025-02-12/eu-to-review-corporate-liability-under-europe-s-toughest-esg-law