A group of U.S. lawmakers has expressed concerns over the European Union's Corporate Sustainability Due Diligence Directive (CSDDD), highlighting potential risks to American competitiveness. The letter, addressed to Secretary of the U.S. Department of Treasury Scott Bessent and Director of the National Economic Council Kevin Hassett, was sent by French Hill, Ann Wagner, Andy Barr, Tim Scott, and Bill Hagerty.
The legislators outlined several points in their communication. They urged support for European calls to pause CSDDD indefinitely and argued that its extraterritorial application is detrimental to global productivity. "European firms listing in the U.S. could also face similar regulatory exposure, which may discourage transatlantic economic cooperation," they noted.
The lawmakers suggested removing Article 29 on civil liability from CSDDD to protect American companies and advised against replicating it in future EU regulations. They also called for clarification that U.S. companies should not be bound by net zero transition plans like those imposed on EU firms.
In their letter, they stated: "We write to express our concerns regarding the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) and the significant risks it poses to the competitiveness of the United States."
President Trump recently described such directives as "non-economic" trade barriers during a speech at the World Economic Forum in Davos, Switzerland. The lawmakers echoed this sentiment, stating that CSDDD imposes extensive regulatory burdens on U.S. companies globally.
According to estimates, at least 300 U.S. companies listed in the S&P 1500 will be directly affected by CSDDD due to its broad application to businesses generating revenue from Europe.
CSDDD mandates stringent due diligence requirements for supply chains to identify human rights and environmental abuses based on UN and OECD principles—principles not ratified by Congress—which raises legitimacy concerns about EU enforcement against U.S. companies.
The directive also affects small businesses supplying larger firms within the U.S., potentially diverting resources away from crucial areas like research and development or talent acquisition.
Furthermore, CSDDD challenges U.S. jurisdictional sovereignty by requiring all companies meeting a €450 million turnover threshold to disclose information beyond what is relevant for U.S. investors—a misalignment with U.S. legal principles highlighted by recent SEC intentions.
Corporate law academics suggest that CSDDD exposes U.S. firms to higher legal risks than their European counterparts—a concern underscored by a United Auto Workers lawsuit against Mercedes Benz seeking foreign legal frameworks over established U.S. labor laws.
Additionally, CSDDD requires incorporating European stakeholder perspectives into business planning processes concerning human rights and environmental risks—a move that could violate directors' fiduciary duties under U.S. law.
In conclusion, they urged immediate diplomatic engagement: "CSDDD represents a serious and unwarranted regulatory overreach... We strongly urge immediate diplomatic engagement to challenge and halt its implementation."