EU simplification agenda - not so simple

It is not hyperbole to call last week's vote in the European Parliament (the Parliament) a landmark moment. The Parliament narrowly voted against the negotiating position, devised by its Legal Affairs Committee (the Committee), on Omnibus I proposals to amend the Corporate Sustainability Reporting (CSRD) and Due Diligence (CSDDD) directives . The Parliament was expected simply to rubberstamp the Committee's mandate ahead of the start of negotiations, but those against the mandate had other ideas and prevailed by just nine votes. 

Background

Our ESG & Sustainability Lead, Jill Shaw, has previously written about the Omnibus I package of legislation, including the proposal to simplify CSRD and CSDDD (see here and here). The key proposed amendments are:

1. Raise the threshold for in-scope companies under CSRD to capture only large companies with more that 1,000 employees and either a net turnover of more than €50m, or a balance sheet total greater than €25m. In its negotiating mandate published in June 2025, the Council of the EU agreed with the threshold being raised to 1,000 employees, as did the Committee in the defeated mandate. However, both the Council of the EU and the Committee support a significantly higher financial threshold of €450m turnover.
    
2. Confine due diligence requirements under CSDDD to direct business partners only and drop the EU-wide civil liability regime. The European Commission did not propose altering the thresholds of CSDDD, but the Council of the EU is of the opinion that this should be raised to capture EU and non-EU companies with at least 5,000 employees and €1.5b turnover (from the current threshold of 1,000 employees and €450m turnover). The Committee, in its mandate, agreed with the Council. The Council of the EU approves of the proposal to scrap the liability regime, but it has proved divisive in the Parliament.

There were signs of trouble prior to last week's parliamentary vote, with reports in recent weeks detailing disagreement between Committee members from different political groups. There were supposedly two alternative proposals on the table - a lighter-touch option that was seen as more palatable to centre and left-wing members, and a second option, backed by those on the right, which pushed for further concessions. An uneasy compromise was reached among the so-called 'von der Leyen coalition' of centrist and left parties, which is made up of the European People's Party (the EPP), Socialists & Democrats (S&D) and Renew. The Committee's lead on the proposal, Jörgen Warborn of the EPP, had reportedly threatened to side with the right, if the others refused to agree. Lara Wolters of the S&D resigned from the Committee in protest.

The events of last week may be a sign that some of Warborn's negotiating tactics were ill-advised. The vote took place by way of secret ballot, a rarity in such situations, which likely gave members of the S&D and Renew the opportunity to voice their opposition to the mandate. The result was a win for those on both the left and the right, who see the proposed reforms as either going too far, or not far enough. In the press conference held after the vote, Warborn was at pains to lay blame at the feet of the S&D, 31 of whom called for the vote in the first place.

Pressure from Member States and beyond

The vote exposed divisions in the Parliament at a time when there is significant pressure from Member State governments, as well as external operators, to speed up reforms. In the conclusions published after last week's European Council meeting of the 27 EU leaders, the European Council "urges the Commission and the co-legislators [the Parliament and the Council of the EU] to accelerate their work, as a matter of utmost priority, on all files with a simplification or competitiveness dimension" and "to swiftly conclude work on the proposed simplification omnibus packages on sustainability reporting and due diligence", among others. The statement finishes with the imperative that the package on sustainability reporting "should be adopted by the end of the year". 

In an unprecedented move, the US and Qatari governments last week issued a joint letter to the EU, calling for the repeal of CSDDD in its entirety or the removal of "its most economically damaging provisions".

What happens next?

The consequence of the vote is that the legislative proposal has now been opened up to the full Parliament for review and amendment. MEPs from all political groups may propose new changes and potentially rewrite the Parliament's negotiating position. It remains to be seen whether the centre-left alliance can repair relations sufficiently to reach agreement, or if the EPP will look to the right for support and thus, champion more significant amendments. A fresh vote on any and all amendments is scheduled for 13 November. Depending on how the next two weeks pan out, expect (organised) chaos in Parliament!

For further information on this topic, please contact Anne O'Neill (author), Jill Shaw, or any member of ALG’s ESG & Sustainability group.

Date published: 28 October 2025