Senate Banking Committee Chairman Tim Scott and several colleagues have raised concerns over the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD). In a letter addressed to Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett, Scott, along with House Financial Services Committee Chairman French Hill, House Financial Services Subcommittee on Capital Markets Chairman Ann Wagner, House Financial Services Subcommittee on Financial Institutions Chairman Andy Barr, and Senate Banking Subcommittee on National Security and International Trade and Finance Chairman Bill Hagerty, expressed their apprehensions regarding the directive's potential impact on U.S. competitiveness.
The lawmakers highlighted that "CSDDD imposes stringent due diligence requirements on in-scope companies," requiring them to assess supply chains for human rights and environmental abuses as per United Nations (UN) and Organisation for Economic Cooperation and Development (OECD) principles. They noted these principles are not ratified by Congress, questioning the EU's authority to enforce them against U.S. companies. The directive could also affect small businesses within the U.S., diverting resources from essential areas like research and development.
They further stated that "U.S. firms will face increased litigation risks" due to possible enforcement actions from EU member states, with penalties reaching up to five percent of a company's global turnover. Concerns were also raised about CSDDD undermining U.S. jurisdictional sovereignty by imposing regulatory obligations that differ from U.S. corporate governance laws.
The letter urged the administration to support European calls to pause CSDDD indefinitely and argue against its extraterritorial application. It was suggested that Article 29 (civil liability) be removed from the directive to protect American companies.
Background information reveals that this is part of Chairman Scott’s ongoing efforts against burdensome European climate-related disclosure policies affecting U.S. businesses. In June 2023, Scott requested information from the Department of Treasury and SEC regarding coordination with the EU on ESG measures impacting American industry.
In September 2024, Scott joined others in urging senior Biden-Harris administration officials to advocate for U.S economic interests concerning CSDDD’s implementation.