Dive Brief:
- The U.S. is calling for the European Union to make additional changes to its corporate sustainability laws, which it says will “adversely impact” the ability of its businesses to compete in the bloc’s market.
- “While the United States acknowledges some positive reforms in the December 2025 Sustainability Omnibus, those reforms failed to fully address U.S. concerns regarding these directives,” Andrew Puzder, U.S. ambassador to the EU, said in a comment letter posted to X Friday.
- Puzder said in a post on X that “it’s time for the EU to deliver” on promises made in the U.S. and EU’s August 2025 trade agreement. At the time, the EU promised to “reduce the administrative burden” of the Corporate Sustainability Due Diligence Directive on U.S.-based businesses and that the Corporate Sustainability Reporting Directive would not create “undue restrictions on transatlantic trade.
Dive Insight:
Following the trade agreement, EU legislators reached a political agreement in December to raise compliance thresholds for the CSDDD and CSRD that is expected to remove around 90% of companies from the CSRD’s scope and 70% of companies from the CSDDD’s remit. Puzder’s letter makes clear that the U.S. still has multiple issues with the laws, including their scope and references to net-zero commitments, along with their compliance obligations and enforcement and litigation procedures.
Puzder’s comment letter said the two laws’ double materiality standards — which would require businesses to report the impact their operations have on the environment or community along with financial impacts — “would significantly expand the reporting burden for non-EU companies with minimal links to the EU market.”
“The United States therefore requests that the EU address remaining U.S. concerns with the obligations CSDDD and CSRD impose on U.S. businesses domiciled outside of the EU, so that U.S. companies, producers, and farmers are not unduly burdened by these directives,” Puzder said. “The United States will take any actions necessary to address unreasonable burdens on U.S. commerce absent a solution that addresses these concerns.”
The letter asks that the EU “limit application of the CSDDD to the activities of the EU subsidiaries of U.S. businesses or the EU business partners of U.S. businesses,” and have the law only apply “to goods that are produced in, or services that are supplied from, the EU.” The letter also asks that the EU not bring “any penalty on a U.S. business, or an EU subsidiary of a U.S. business, that is based on revenue derived from activities outside the EU.”
The trade framework agreement reached last year was designed to be a “first step” to increase the trade and investment relationship between the bloc and the U.S., experts from law firm Ropes & Gray said in a Monday post reviewing the letter. The U.S. government has expressed concerns about the two laws since the proposal stage, including their extraterritorial reach, the lawyers said.
“As an overarching comment, the U.S. Government is asking the EU and its Member States to significantly limit CSDDD and CSRD reporting and due diligence requirements on US businesses,” Ropes & Gray Partner Michael Littenberg and Associate Samantha Elliott wrote.
The agreement EU legislators reached in December altered the scope of the CSRD to apply to EU-based companies with more than 1,000 employees and 450 million euros ($521 million) in revenue, and non-EU entities that generate over $521 million in revenue in the EU. The agreement limited the scope of the CSDDD to apply to EU companies with more than 5,000 employees and 1.5 billion euros ($1.7 billion) and non-EU entities that generate more than $1.7 billion in the EU. The pact was later passed by the European Parliament and adopted by the European Council.
Last month the European Commission adopted revised sustainability reporting standards — required for companies covered by the CSRD — that will reduce the number of mandatory data points by 60% and total data points by 70%. The Commissions also adopted a voluntary standard for companies not covered by the law; companies covered by the CSRD are not allowed for more information from supply chain partners than what is included in the voluntary standard.
