U.S. Urges EU to Ease Sustainability Rules for American Firms

The United States government is taking a strong stance against the European Union's recent sustainability regulations, advocating for significant concessions for American companies. In a detailed five-page submission to the EU, Washington has expressed its intent to take "any actions necessary" if the bloc does not alleviate what it views as excessive burdens on U.S. businesses.

The U.S. is specifically seeking to limit the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) in ways that would favor American firms. One of the main requests involves excluding non-EU companies from the CSDDD's direct scope, meaning that American businesses would not face the same stringent requirements as their European counterparts.

Moreover, the U.S. is calling for changes to how due diligence responsibilities are assigned, suggesting that obligations should be confined to a company’s EU subsidiaries or partners. This is particularly crucial for the fashion industry, where brands often lack a direct contractual relationship with various suppliers, including cotton growers and textile mills. The U.S. argues that suppliers further down the supply chain should not be subjected to audits or information requests if they do not directly supply to a company covered under the CSDDD.

Washington's submission also critiques the EU's approach to double-materiality, which requires companies to report the financial impacts of sustainability issues as well as the effects of their operations on the environment and society. The U.S. contends that its own laws focus primarily on financial materiality, which could lead to conflicting compliance standards for American firms operating in the EU.

Another key aspect of the U.S. demands is the designation of the U.S. as a "negligible risk" jurisdiction regarding these directives. Washington is asserting that American companies already adhere to rigorous supply-chain regulations and should be presumed compliant unless proven otherwise.

The backdrop to these discussions is the EU's recent amendments to the directives, which have already narrowed their scope significantly. Notably, the thresholds for companies to fall under CSDDD have been raised, now applying only to those with over 5,000 employees and 1.5 billion euros in global turnover. Non-EU firms are only included if they generate more than 1.5 billion euros within the EU's market.

While the revisions have been acknowledged as a step forward, the U.S. believes they do not adequately address its concerns. The agreement reached in August 2025 between the U.S. and the EU aimed to avoid any undue restrictions on transatlantic trade, but Washington's latest submission lays out what it believes is necessary for compliance with that agreement.

In addition to the scope of the directives, the U.S. is also pushing for limitations on penalties imposed on American businesses, suggesting that fines should only apply to revenue generated within the EU. The current framework allows for penalties of up to 3 percent of a company's global turnover, which the U.S. finds excessive.

To ensure fair enforcement, the U.S. has called for a regulator-led system that would allow civil claims only after a supervisory authority has determined non-compliance, emphasizing that claims should demonstrate a direct connection to harm in the EU. Concerns have also been raised about the accuracy of third-party auditors, with the U.S. urging the EU to enforce stricter independence and accreditation standards.

As the U.S. continues to voice its concerns, the outcome of these negotiations remains uncertain, with both sides navigating complex regulatory frameworks. The U.S. has reserved the right to submit further comments on the directives as discussions progress.

Source: wwd.com