MEPs back rollback of corporate sustainability Rules amid industry pressure

The European Parliament’s Legal Affairs Committee has approved a major scaling back of the EU’s proposed sustainability and due diligence rules for companies, a move hailed by industry but sharply criticised by environmental and human rights groups.

With 17 votes in favour, 6 against and 2 abstentions, MEPs backed a position that would limit mandatory sustainability reporting to firms with more than 1,000 employees and annual turnover above €450 million. This narrows the scope even further than the European Commission’s original proposal, excluding thousands of smaller companies from social and environmental reporting obligations.

Under the revised approach, companies outside the scope would report voluntarily, while the largest firms would still have to prepare climate transition plans and could face fines of up to 5% of global turnover for non-compliance. Due diligence obligations would also apply only to very large businesses, those with over 5,000 employees and €1.5 billion in turnover, with liability resting under national rather than EU law.

The decision comes amid mounting lobbying pressure from Europe’s corporate giants. Nearly 50 major companies, including TotalEnergies and Siemens, recently urged German Chancellor Friedrich Merz and French President Emmanuel Macron to “abolish” the bloc’s corporate due diligence rules, arguing they threaten competitiveness.

Rapporteur Jörgen Warborn (EPP, Sweden) said the vote “delivers predictability for European companies” and “keeps Europe’s green transition on track.”

Environmental NGOs, however, warned that the changes undermine the EU’s sustainability ambitions. WWF said the move “undermines” the bloc’s corporate responsibility agenda, while Share Action described the reforms as “watered down,” lamenting that “few in power are standing up to stop it.”

If endorsed by the full Parliament later this month, negotiations with EU governments are expected to begin shortly after.