EU due diligence, downward compromise fails in the European Parliament. Clash between EPP and S&D

From the correspondent in Strasbourg – Another storm over European due diligence and sustainability reporting rules for companies. The hard-won compromise between popular, socialist and liberal parties to simplify the directives and lighten the burden on companies has fallen through: the EU Parliament rejected it by a hair’s breadth, with 309 votes in favour, 318 against, and 34 abstentions. Now the text will be reopened and the People’s Party will be able to do as it pleases, allying itself at will with the extreme right to approve further regulatory simplification amendments. 

The two directives in question, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDD), were approved with immense difficulty in the last parliamentary term, when the pact between the three groups was much firmer, and the numbers in the EU Parliament did not allow for alternative majorities. They have been among the first victims of the European Commission’s new simplification agenda, which included their revision in the first of six ‘Omnibus’ packages proposed in recent months. 

On 13 October, the Legal Affairs Committee of the European Parliament adopted the mandate to start negotiations with the Member States, based on an agreement reached in extremis between the EPP, S&D, and Renew. The text approved in JURI aimed to further reduce the scope of application of both laws: for reporting rules, it called for them to apply to companies with more than 1,000 employees and an annual net turnover of more than €450 million; for environmental and human rights monitoring obligations across the supply chain, only to large companies with more than 5,000 employees and an annual net turnover of more than €1.5 billion. 

The negotiated numbers resulted from a ‘take it or leave it’ stance by the EPP, which, bolstered by a possible majority with the extreme right-wing groups, imposed its own conditions on the Liberals and Socialists to secure a compromise with the pro-European forces. Above all, the socialists had justified this agreement as the ‘lesser evil’, and Iratxe Garcia Perez, leader of the S&D group, assured the group’s support for the text yesterday. 

But the objection to the mandate raised by The Left, the radical left-wing group, and the request for a secret ballot in plenary tabled by the extreme right-wing groups, Conservatives (ECR), Patriots (PfE) and Sovereignists (ESN),

threw a spanner in the works. And in the end, in the secret of the ballot box, the fragile majority collapsed. Now the text approved in JURI will be reopened, discussed, and voted on 13 November.

At a press conference on the sidelines of the vote, Roberta Metsola, President of the EU Parliament, commented: “This vote shows that for a large part of the Parliament the compromise was not enough, and for others it was too much.” Because, despite the secret vote, one can easily assume that it was the three groups of the extreme right on the one hand and the Greens and the Left on the other who opposed it. But, even all together, they count 290 MEPs. This means that someone within the majority itself caused the compromise to fail. 

For Jörgen Warborn, EPP MEP and rapporteur of the compromise text, the culprits are to be found in the ranks of the Socialists. There would be “31 S&D members” among the signatories of the objection that triggered today’s vote. Therefore, “it is quite clear that they made the difference. On the other hand, the head of the Democratic Party delegation and Socialist MEP Nicola Zingaretti said that “the numbers say” that “at least one part” of the EPP rejected the text. For the Dem, “in the secret of the ballot box that alliance between the Popular Party and the extreme right” has been reaffirmed, which will now “violently attack” the Green Deal. Warborn himself was clear: “There was also an alternative compromise on the table,” he warned—the much more radical one, proposed by the extreme right. In the end, the EPP won, and in a fortnight, it will be free to keep a foot in both camps.