Lawmakers rejected part of a simplification package, as the centrist majority was defeated by nine votes
The European Parliament rejected a bill on Wednesday to simplify rules for European businesses on sustainability reporting and due diligence obligations.
The vote comes amid mounting pressure from some EU member states to pass the bill and from the US and Qatar to scale back the EU's due diligence law contained in it, which in their view risks disrupting liquefied natural gas trade with Europe.
What is the law about
The EU's due diligence law (Corporate Sustainability Due Diligence Directive) was adopted in May 2024 and requires companies to check their supply chains for questionable environmental and labour practices.
Companies that fail to comply with these obligations may face a penalty of up to 5% of their net revenue.
The law was strongly criticised by EU states for the administrative burden it would have entailed for the companies. Germany's Chancellor Friedrich Merz even demanded the law be scrapped entirely, saying it hurts European businesses' competitiveness.
A recent letter signed by US Energy Secretary Chris Wright and Qatar's energy minister, Saad al-Kaabi, reported by Reuters, asked the EU to either repeal the law entirely, or remove some of the provisions, like the application to non-EU companies working, the penalties for non-compliance and its requirement for companies to have plans in place to comply with climate change goals.
In February 2025, the European Commission proposedsignificant changes to the law through a simplification package called "Omnibus I."
The new version prescribes that only companies with more than 5,000 employees — instead of the 1,000 — and with a yearly turnover of €1.5 billion — instead of €450 million — would be obliged to comply with the bloc’s due diligence law.
A clash in the Parliament and with the Council
The Parliament’s political groups forming the centrist coalition that supports the European Commission - the European People's Party (EPP), Socialists and Democrats (S&D) and Renew Europe - found an agreement on this basis, which was eventually rejected by the plenary session.
With 318 votes against, 309 in favour, and 34 abstentions, the lawmakers on Wednesday subverted the decision adopted by the Parliament's Legal Affairs Committee on 13 October.
As the vote was held via secret ballot, there is no track record of how MEPs voted. The groups of the centrist majority together have 409 MEPs, meaning that one fourth of them have either broke ranks, abstained, or did not show up to vote.
According to Parliament sources, some MEPs from Socialists and Renew voted for the rejection, like the ones from German Freie Wähler and the Dutch People's Party for Freedom and Democracy.
Both the far-right and left sides of the Parliament claimed victory for the rejection of the bill.
Patriots for Europe (PfE) and Conservatives and Reformists (ECR) were against the compromise text, as in their view it did not reduce enough the burdens for companies.
"The package contained only minor technical adjustments without delivering real simplification," reads a note from the PfE after the vote.
The Left and the Greens considered, on the contrary, that the original proposal of the EU's due diligence law had been watered down too much by the Commission's push for simplification.
"The vote makes it clear that Parliament is not ready to rubber-stamp a deal that weakens Europe's sustainability framework," said Greens MEP Kira Marie Peter-Hansen.
After this rejection, the Parliament will need to adopt a new position on the file, with amendments to be voted on at the upcoming plenary session in Brussels on 13 November. Negotiations will resume from scratch, meaning that key elements like the threshold of companies affected by the law and its turnout could be reopened.
"This is a disappointment, let’s see what we do now," said a diplomat from a member state after the vote, while officials in the Commission have grown concerned over the gap between member states and the Parliament.