© European Parliament
In a surprise move, the EU parliament rejected a proposal that would water down climate reporting requirements and lower the scope of coverage for thousands of EU firms.
The EU’s sustainability omnibus proposal was blocked by nine votes in a secret ballot, with 318 votes against, 309 in favour and 34 abstentions. While the proposal was initially set to go through without a formal vote after it was passed by a committee, rightwing groups requested a secret ballot.
That secret ballot may have given some MEPs the push they needed to vote against their party’s stance. It’s also a “reality check”, said Richard Gardiner, interim head of EU policy at ShareAction.
“The rejection of the omnibus proposal shows that attempts to force through deregulation without genuine compromise or consultation have failed.”
The vote means that parliament will not move forward with trilogues, which are the negotiations between European governments and the European Commission. Instead, the members of parliament will vote at the next plenary meeting on 13 November, and the omnibus is now open to renegotiation and amendments.
“What we are witnessing is no longer a debate about policy but a battle of politics,” said Tsvetelina Kuzmanova, senior project manager at the Cambridge Institute for Sustainable Leadership. “The focus has shifted from improving the rules to using them as bargaining chips. This is a worrying signal for Europe’s credibility, especially when sound governance and responsible business conduct should be the baseline, not the casualty of political games”
Simplification or deregulation?
It’s unclear who killed the deal, but discussions around the omnibus have been marred by politics since the start.
The green omnibus was proposed by the EU commission in February with the aim of simplifying reporting requirements and cutting red tape to help the bloc compete with the US and China. But many investors, NGOs and even central bankers have raised concerns that the proposal will effectively kill the Green Deal policies and drastically limit the data needed for ESG investments and even regulation.
Agnès Bénassy-Quéré, deputy governor of the Banque de France, said in a speech on Tuesday that while the omnibus includes “welcome simplifications”, it should not alter the ambition of the reporting framework.
“Simplification does not mean deregulation,” she said. “If we manage to simplify the reporting framework while ensuring the availability of robust and comparable data necessary for the transition, we will have a win-win situation: our framework will gain in both efficiency and ‘acceptability’.”
The proposal rejected by MEPs was in line with the Commission’s original proposal, which would include removing around 80% of companies from the scope of the corporate sustainability reporting directive (CSRD) and would remove reviews of value chains with direct business partners under the corporate sustainability due diligence directive (CSDDD).
Hans Stegeman, economist at Triodos, said that while simplification of the rules is needed, the proposals go far beyond that towards deregulation.
“Europe’s competitiveness does not depend on lowering standards but on leading in the transition to a sustainable economy,” he said.
“Policymakers should be careful not to allow for further weakening. Europe’s future lies in better regulation – rules that are clear, consistent and aligned with long-term public interests – not in deregulation that sacrifices sustainability for short-term gains. The credibility of Europe’s commitment to a fair and sustainable economy is at stake.”
Many of the discussions around the proposed omnibus regulation were held behind closed doors, with very little input from stakeholders like asset managers and investors, who were hoping the data from the reporting rules would actually give them a competitive advantage on sustainability investing. Many ESG investors rely on third-party estimates, which are less reliable.
Political pressure and backlash
The vote comes amid calls from the US and Qatar for the EU to repeal the CSDDD, which would apply to non-EU companies operating in the block. But such a move would be a huge mistake, political and civil society leaders have warned.
In a press statement, the parliament noted that it aimed to finalise the deal by the end of 2025. However, with the latest vote that is looking less likely.
Centrist groups, including the European People’s Party (EPP), Renew, and the Socialists and Democrats, agreed to the proposed rollback after the EPP threatened to work with the far-right instead.
“Today’s vote showed that for a huge section of the parliament, this compromise simply did not go far enough, and for some sections, it went too far,” European parliament president Roberta Metsola said at a press briefing following the vote.
Gardiner said that the deal by centrist leaders backfired and the “framework cannot be rewritten through political coercion or backroom manoeuvres”.
“Europe’s competitiveness and credibility depend on rules that work for people, the planet and investors alike. This vote opens the door to rebuild trust and craft reforms that make the EU’s sustainability framework simpler, smarter and stronger, not gutted in the name of speed,” he said.
Update, 27 October: a previous version of this article implied that the European parliament’s press statement said the ambition to complete the omnibus process by the end of 2025 was unrealistic; this has been amended to remove that implication.
This page was last updated October 27, 2025
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
