In a closely contested vote, the European Parliament rejected a proposed compromise to scale back the EU’s sustainability reporting and due diligence requirements, a move that deepens political divisions and delays progress on the bloc’s broader simplification agenda [1][2][3].

The proposal, part of the European Commission’s Omnibus I package introduced in February 2025, sought to ease compliance burdens for companies under key regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Lawmakers voted 318 against, 309 in favor, and 34 abstained, effectively sending the legislation back to the drawing board [1][2][3].

The compromise, negotiated between the European People’s Party (EPP), the Socialists and Democrats (S&D), and Renew Europe, would have significantly narrowed the scope of both directives. It proposed limiting the CSRD to companies with more than 1,000 employees and annual revenues exceeding €450 million and restricting the CSDDD to firms with over 5,000 employees and revenues above €1.5 billion [1][3].

However, the deal collapsed under internal dissent and political polarization. The secret ballot obscured voting lines, but reports suggest defections within both centrist and left-leaning parties. EPP rapporteur Jörgen Warborn accused members of the S&D group of breaking ranks, while Socialist MEP Nicola Zingaretti countered that parts of the EPP aligned with the far right, reaffirming what he called “an alliance between the Popular Party and the extreme right” [3].

The rejected text followed growing external and internal pressure to weaken EU sustainability laws. Business groups and several member states, including Germany, had criticized the CSDDD for creating administrative burdens, while energy exporters like the U.S. and Qatar urged Brussels to scale back the law, arguing it could disrupt liquefied natural gas trade with Europe [2].

Environmental and progressive lawmakers, however, celebrated the rejection, viewing it as a stand against the dilution of the EU’s sustainability framework. Greens MEP Kira Marie Peter-Hansen said the vote proved that “Parliament is not ready to rubber-stamp a deal that weakens Europe’s sustainability framework” [2].

The outcome now forces the Parliament to reopen negotiations and draft a new position before the next plenary session on 13 November. This restart raises uncertainty for businesses awaiting clarity on the scope and timing of reporting and due diligence obligations, as both directives remain central to the EU’s broader Green Deal and corporate accountability agenda [1][2][3].

Despite setbacks, EU leaders stress the need for balance between competitiveness and sustainability. “Businesses need clarity now,” Warborn said after the vote, calling for swift progress to “create the business climate we need for growth and a prosperous Europe for all” [1].

References
[1] ESG Today. EU Parliament Rejects Agreement to Cut Sustainability Reporting and Due Diligence Laws. Retrieved from https://www.esgtoday.com/eu-parliament-rejects-agreement-to-cut-sustainability-reporting-and-due-diligence-rules/

[2] Euronews. European Parliament rebels against simplified sustainability requirements. Retrieved from https://www.euronews.com/my-europe/2025/10/22/european-parliament-rebels-against-simplified-sustainability-requirements

[3] EU News. EU due diligence, downward compromise fails in the European Parliament. Clash between EPP and S&D. Retrieved from https://www.eunews.it/en/2025/10/22/eu-due-diligence-downward-compromise-fails-in-the-european-parliament-clash-between-epp-and-sd/