The United States Government has formally urged the European Union to address growing concerns regarding the extraterritorial reach and economic impact of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD).
In official comments submitted to the bloc, Washington highlighted that despite minor reforms in the December 2025 Sustainability Omnibus, the directives continue to impose onerous supply chain due diligence and reporting burdens on American businesses. The submission noted that the EU’s “double materiality” reporting framework contrasts with the single financial materiality standard used in US law, creating significant compliance hurdles for firms with minimal direct links to European markets.
The US Government pointed to commitments made in the August 2025 US-EU Joint Statement on a Framework on an Agreement on Reciprocal, Fair and Balanced Trade, where the EU pledged to ensure these directives do not create undue restrictions on transatlantic trade. Washington argued that extending CSDDD requirements to US companies—which are already subject to domestic supply chain regulations—violates principles of international comity and creates duplicative regulatory obligations.
Specifically, the US submission requested that the EU and its Member States:
- Limit the application of CSDDD exclusively to the activities of EU-based subsidiaries or direct European business partners, restricting due diligence requirements to goods and services supplied within the EU market.
- Prohibit financial penalties or fines against US companies or their EU subsidiaries based on worldwide turnover or revenue generated outside the EU.
- Establish a regulator-led enforcement model for civil liability under Article 29, allowing private claims to proceed only after a supervisory authority has officially determined a failure to comply.
- Designate the US as a jurisdiction posing “negligible risk” under risk-based supply chain assessment guidance, establishing presumed compliance for firms operating under US regulatory frameworks.
- Clarify that Member States should not reintroduce mandatory net-zero climate transition plan requirements during national transposition following the removal of Article 22.
The US Government warned that absent a practical resolution to these regulatory conflicts, it retains the right to take necessary actions to protect American commerce from unreasonable trade burdens.
