The U.S. Government has issued a series of requests from the European Union to address concerns with the impact of the EU’s new sustainability due diligence and reporting laws – the CSDDD and CSRD – on U.S. companies.
In a comment letter, issued by U.S. Mission to the European Union, the U.S. Government said that the EU Commission’s Omnibus package to simplify its sustainability regulations, including the CSDDD and CSRD “failed to fully address U.S. concerns regarding these directives,” and warns that “the United States will take any actions necessary to address unreasonable burdens on U.S. commerce absent a solution that addresses these concerns.”
The Corporate Sustainability Due Diligence Directive CSDDD was initially proposed by the European Commission in 2022, and adopted in 2024, setting out obligations for companies to identify, assess, prevent, mitigate, address and remedy impacts on people and planet – ranging from child labor and slavery to pollution and emissions, deforestation and damage to ecosystems – in their upstream supply chain and some downstream activities.
The EU’s Corporate Sustainability Reporting Directive (CSRD) took effect for large EU companies in 2024, and will apply to large non-EU companies that operate in the EU with initial reporting scheduled for 2029.
In August 2025, the U.S. and EU announced a Framework on an Agreement on Reciprocal, Fair, and Balanced Trade (Framework Agreement) that included a clause on the sustainability regulations, with the EU committing to undertake efforts to ensure that the CSDDD and CSRD “do not pose undue restrictions on transatlantic trade,” including by reducing the administrative burden on businesses from the regulations.
Both regulations were significantly scaled back, both in terms of compliance requirements and companies in the scope of the rules, through the EU Commission’s Omnibus simplification process. The CSDDD, for example, had its threshold raised from applying to companies with more than 1,000 employees to those with over 5,000 employees and €1.5 billion in revenue, and had its obligation for companies to prepare climate transition plans removed. The CSRD changes dramatically cut the number of mandatory reporting datapoints required under the regulation, and cut the number of non-EU companies expected to be covered by the regulation to approximately 1,200 from around 10,000.
The new letter, however, indicates that the U.S. Government believes the changes did not go far enough, and lists concerns over the adverse impact on U.S. businesses from the regulations’ “extraterritorial reach and costly and onerous supply chain due diligence obligations,” noting in particular the EU’s “double materiality” standard applied by the EU, which requires materiality to be assessed on both the risks and impact of sustainability issues on an enterprise, as well as on the enterprises’ impacts on environment and society, compared with the U.S.’ single financial materiality standard. The publication adds that the CSDDD’s “expansive extraterritorial scope” will place a burden on U.S. companies and suppliers that have only minimal business in the EU market.
The U.S. comment letter sets out a series of requests in areas including the scope, compliance obligations, and enforcement of the regulations, including asking that the EU “significantly limit CSDDD and CSRD reporting and due diligence requirements on U.S. businesses, and limit enforcement actions against U.S. businesses,” including by limiting the application of the CSDDD to the EU subsidiaries of U.S. businesses or the EU business partners of U.S. businesses, and by applying the CSDDD only to goods and services originating from the EU. The letter also asks that the EU “prohibit the levying of 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.”
Additionally, the letter requests that the CSDDD designate the U.S. “as a jurisdiction that poses negligible risk,” given the U.S.’ “robust governance framework,” with the EU asked to “establish a “presumed compliance” provision for companies operating in high-quality regulatory jurisdictions,” and also asks that the CSDDD “should not reintroduce mandatory net zero climate transition plans and related requirements.”
In a post announcing the release of the comments, the U.S. Ambassador to the European Union, Andrew Puzder, said:
“Extraterritorial provisions harm American businesses and workers, but it is not just the U.S. that will suffer. Unless the EU changes course, these directives will burden EU and non-EU businesses of all sizes — and European consumers are the ones who will ultimately foot the bill.”
Click here to access the comment letter.
