The European parliament’s rejection on October 22 of a compromise position on the Omnibus I package – which aims to streamline some of the European Union’s sustainability laws – introduces fresh uncertainty for global sustainability policy as it signals deep divisions over how far the EU should roll back its sustainability reporting and due diligence regimes, potentially weakening Europe’s leadership role in setting environmental, social and governance ( ESG ) standards.

For Asia-Pacific, this may ease short-term compliance pressures on exporters tied to EU supply chains, but it also risks slowing the region’s alignment with global sustainability norms.

While Asian firms could benefit temporarily from lighter reporting demands, the broader outcome may be a loss of regulatory clarity and slower progress towards transparent, accountable value chains across the region.

For context, on October 22, lawmakers in the European parliament rejected a compromise agreement on forming its negotiating position on the EU commission’s Omnibus I law, which would have seen more significant reductions in the EU’s sustainability reporting and due diligence regulations than those proposed by the commission, but less than those proposed by right-wing parties. The goal of Omnibus I is to simplify and reduce compliance burdens in sustainability and due diligence laws ( CSRD, CSDDD, Taxonomy, CBAM, etc. ).

The negotiations are taking place between three parties, namely, the European commission ( the EU’s executive body ), the Council of the EU ( national governments ) and the European parliament, the directly elected legislative body of the EU. Under these negotiations, known as the “trilogues”, the parliament negotiates primarily with the council, while the commission acts as a facilitator or mediator.

Negotiations towards a finalized Omnibus I package between the EU parliament and council were slated to have started later last week, but will now be pushed back, with the parliament scheduled for its next vote on the Omnibus on November 13.

The Omnibus I package is technically part of a broader Omnibus Directive and Regulation framework tied to the EU’s Better Regulation agenda. The November 13 vote is a tentative re-vote date. This can shift depending on committee scheduling.

During the voting on October 22, which was done in secret ballot, the parliament’s originally agreed position was defeated narrowly, with 309 votes in favour, 318 against and 34 abstentions.

The vote sends the Omnibus initiative back to the negotiation stage in parliament, raising uncertainty for businesses regarding the final outcome, with some lawmakers pushing for reduced reductions to the EU’s sustainability regulations and others calling for much sharper cuts.

In terms of the impact on sustainability, in general, the current failure to agree on a unified parliament position means there is no clear legislative direction on how far EU sustainability rules ( like CSRD and CSDDD ) will be scaled back.

“Negotiations are now expected to take longer, delaying implementation timelines and creating uncertainty for companies preparing to comply with or report under these frameworks,” according to an analyst. “Even if a new deal emerges, it’s likely to reflect some level of dilution, smaller company coverage, reduced due diligence depth and limited supply-chain transparency. This may reduce the EU’s global leadership pressure on sustainability and ESG disclosures, especially if large blocs push for similar competitiveness-driven simplifications.”

For the Asia-Pacific region, the rejection amplifies the extraterritorial ripple effects of EU sustainability regulations on global supply chains, potentially leading to heightened compliance demands rather than relief, as fewer EU companies might be exempt if cuts are limited.

This means that for Asia-Pacific corporates with EU supply chains, whether compliance pressure eases or intensifies will depend on how much the final EU thresholds for compliance are raised, and the current uncertainty means both outcomes are possible.

More critically, indirect impacts hit Asia-Pacific suppliers, even those not directly in scope, through EU firms’ obligations to demand transparency, audits, data on sustainability credentials and remedial actions from partners in sectors like textiles, food, minerals and electronics.

This uncertainty exacerbates the challenges for Asia-Pacific businesses, many of which are unprepared due to data gaps and fragmented processes, but it also presents opportunities to build resilience.