Legal scholars are raising the alarm about the European Union’s (EU) decision to weaken its corporate sustainability disclosure, saying that it could well expose companies to climate-related lawsuits.

Thirty-one academics from University of Oxford, University of Cambridge, Utrecht University and other institutions signed on to a letter warning that the EU’s February Omnibus proposal to scale back the requirements and guidance of the Article 22 Corporate Sustainability Due Diligence Directive (CSDDD) is sure to cause chaos. Specifically, the signees believe that lighter reporting obligations for emissions and more variance in the requirements among EU member states, can only increase reporting mistakes — and, in turn, climate-related litigation.

“If you do not have Article 22 CSDDD, then it is quite unclear what is being expected of companies,” said Associate Professor Thom Wexter of Oxford’s Faculty of Law. “And if [EU member states] don’t capture corporate emissions within their legislative framework, they’ll miss a huge part of their economy.”

This is what organizations in the EU — or doing business within it — need to know about the proposal.

Context and clarification

In the past couple of years, the EU has introduced a pair of complementary regulations to standardize sustainability reporting for corporations:

• CSRD, or Corporate Sustainability Reporting Directive, which requires companies to disclose Scope 1, 2 and 3 data; and
• CSDDD, which assesses the impact and inherent risk posed to humanity and the environment by corporate operations and supply chains.

Prior to the Omnibus proposal, CSDDD required companies to “put into effect” a climate transition plan. But now that language will be removed, and that change, the experts argued, falls short of mandating implementation.

Industry appears to favor both CSRD and CSDDD in their original forms. A survey conducted by professional association WeAreEurope found that only 25 percent of responding companies approve of the changes proposed in the Omnibus package.

Obligations will not be met

The European Court of Human Rights ruled in 2024 that all 27 EU member states are obligated to “adopt, and to effectively apply in practice, regulations and measures capable of mitigating the existing and potentially irreversible, future effects of climate change.” But, the letter writers noted, emissions from the largest corporations in each country “are so significant that they are bound to exceed their territorial emissions budgets.”

More to the point, they predict that the differing expectations set by the law of each country and the EU will open up corporations to lawsuits should they fail to comply with either.

Internal market fragmentation

An international human rights case, Milieudefensie et al v. Shell, was the impetus for the creation of CSDDD. In November, the Hague Court of Appeals ruled that Shell was obligated to reduce its emissions. Without any form of guidance, though, there was no way to hold the company accountable.

“Shell complain