The members include Senate Banking Committee chairman Tim Scott and his counterparts across several financial committees.
In a correspondence addressed to Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett, the legislators outlined the substantial challenges they believe the CSDDD could present to US businesses.
Go deeper with GlobalData
The lawmakers called on the administration to:
1. Endorse European calls to pause the directive indefinitely
2. Contest its extraterritorial reach as harmful to international business productivity
3. Advocate for the removal of Article 29 related to civil liability from the directive
4. Ensure that US companies are not obligated to adhere to net zero transition plans like those required for EU firms.
This action builds upon chairman Scott’s ongoing efforts to shield US businesses from European policies on climate disclosures, labour, and social justice initiatives.
The lawmakers stated: “CSDDD imposes stringent due diligence requirements on in-scope companies, mandating the evaluation of supply chains to identify, mitigate, and eliminate human rights and environmental abuses as defined by United Nations (UN) and Organisation for Economic Cooperation and Development (OECD) principles.
“However, these principles have not been ratified by Congress, raising concerns about the legitimacy of EU enforcement against US companies based on these principles. Additionally, small businesses that supply larger companies will also be affected, even if their operations are solely within the US compliance efforts will require significant resource allocation, diverting funds away from critical areas such as research and development, talent acquisition, and investment.
“Furthermore, US firms will face increased litigation risks and potential enforcement actions from EU member states, with penalties under the Directive reaching up to 5% of a company’s global turnover.
“Beyond economic risks, CSDDD undermines US jurisdictional sovereignty. US corporate governance law distinguishes between publicly and privately held companies with regulatory obligations calibrated accordingly.”
Previously in June 2023, Scott and Representative James Comer had sought information from the Department of the Treasury and the Securities and Exchange Commission (SEC) regarding coordination with the EU on ESG and climate-related regulations affecting US enterprises.
Following an unsatisfactory response from the SEC, they requested transcribed interviews with SEC officials to probe further into their involvement with EU directives.
By September 2024, chairman Scott, Senator Bill Hagerty, Representative Andy Barr, and others urged Treasury Secretary Janet Yellen and Biden-Harris administration officials to protect US economic interests by engaging with European authorities to delay or significantly amend the CSDDD.
Last month, research conducted by data platform Semarchy revealed that most companies (83%) are uncertain about their ability to present ESG data that is compliant with the European Union Corporate Sustainability Reporting Directive (CSRD).
The French Government in February also prepared to propose a comprehensive deregulation strategy, which includes an indefinite suspension of the CSDDD enforcement and challenges significant portions of the directive.
