In forming its negotiating stance on the EU Commission’s Omnibus I, lawmakers in the European Parliament rejected a compromise agreement that would have reduced the EU’s sustainability reporting and due diligence regulations more than the Commission’s proposal but less than that of right-wing parties.

With 309 votes in favour, 318 votes against, and 34 abstentions, the agreed stance was narrowly defeated. Businesses are concerned about the ultimate result of the vote, which returns the Omnibus plan to the parliamentary negotiating stage. While some politicians are advocating for even more drastic cutbacks to the EU’s sustainability laws, others are arguing for smaller ones. Since secret votes were used for the voting, it is unknown which lawmakers approved or disapproved of the agreement.

The Omnibus package, which proposed a wide range of regulatory changes to the Corporate Sustainability Reporting Directive (CSRD), the CSDDD, the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM), was unveiled by the Commission in February as part of its simplification agenda to increase European competitiveness and lessen compliance burdens on businesses.

The Commission’s initiative included some of the most important changes, including a drastic expansion of the CSRD’s scope, which eliminated an estimated 80% of companies by changing the regulation to only cover companies with more than 1,000 employees instead of the current 250 employee threshold. The CSDDD’s 1,000 employee threshold was kept, but the due diligence was changed to require full due diligence primarily at the level of direct business partners, and the regulations placed restrictions on the amount of information that could be requested from smaller supply chain companies.

Prior to the accord, lawmakers were widely split on the direction of Parliament’s stance, with far-right parties seeking to do away with the CSRD and CSDDD entirely and left-leaning parties advocating for more modest changes to the legislation.

Following lengthy discussions, the European People’s Party (EPP) last week put out a “compromise” plan that was accepted by the centre and left parties. The compromise kept the 1,000-employee CSRD scope, but it added a €450 million revenue requirement. At the same time, it significantly raised the CSDDD threshold to only include businesses with 5,000 employees and above €1.5 billion in revenue. The deal came about as a result of the EPP allegedly threatening to join the far-right parties on a package that would eliminate the CSDDD’s requirements for businesses to prepare climate transition plans and expand the CSRD’s reach to 1,750 employees.

The EU Parliament’s next vote on the Omnibus is now set for November 13, delaying the start of negotiations between the Parliament and Council to finalise the Omnibus package, which was supposed to begin later this week.

While it is impossible to determine who voted against the agreement, 31 members of the centre-left S&D party had contested the arrangement, which obviously made a difference, given the close vote, according to Omnibus rapporteur Jörgen Warborn of the EPP party, who spoke at a press conference after the vote.