Just Style

US wants EU CSDDD to apply only to EU firms

The US is pressing the EU to limit its Corporate Sustainability Due Diligence Directive (CSDDD) to companies operating in the EU, over concerns it adversely impacts US firms’ ability to operate on a “level playing field”.

In a statement, the US Government said the EU has made a previous commitment to “undertake efforts to ensure” that the CSDDD and Corporate Sustainability Reporting Directive (CSRD) “do not pose undue restrictions on transatlantic trade”, adding that it should “work to address US concerns regarding the imposition of CSDDD requirements on companies of non-EU countries with relevant high-quality regulations.”

“The directives’ extraterritorial reach and costly and onerous supply chain due diligence obligations will adversely impact the ability of US businesses to compete on a level playing field in the EU market,” reads the statement.

“In particular, reporting on due diligence practices pursuant to the CSDDD and the CSRD includes impact-based materiality reporting and a “double materiality” standard, which differs from the single financial materiality standard under US law…the extraterritorial reach of the CSRD and CSDDD would significantly expand the reporting burden for non-EU companies with minimal links to the EU market.

“The United States has a rigorous regulatory regime governing supply chain mapping and due diligence. Therefore, extending the CSDDD to US companies subject to this regime would create duplicative and potentially conflicting obligations for US firms, thus violating basic principles of international comity.”

In a direct request, the US said it wanted the EU to:

Significantly limit CSDDD and CSRD reporting and due diligence requirements on US businesses, and limit enforcement actions against US businesses: Specifically, the EU and its Member States should limit the application of CSDDD to the activities of the EU subsidiaries of US businesses or the EU business partners of US businesses. In addition, the EU should only apply the CSDDD to goods that are produced in, or services that are supplied from, the EU.
Prohibit the levying of any penalty on a US business, or an EU subsidiary of a US business, that is based on revenue derived from activities outside the EU.
Prohibit private rights of action that are not premised on an official sector supervisory enforcement finding.