The US Calls for CSDDD and CSRD Concessions. “Now it's time for the EU to deliver.”

As part of the 2025 US-EU trade framework agreement, the European Union committed to undertake efforts to ensure that the Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD) do not pose undue restrictions on transatlantic trade. 

With US-EU tariff negotiations largely completed, US attention has turned back to concerns over non-tariff trade impacts, including those under the CSDDD and CSRD, as reflected in comments submitted to the EU and published by the US Mission to the EU. On Friday, Andrew Puzder, the US Ambassador to the EU, posted on X that “Now it's time for the EU to deliver.” The US Government’s comment submission is discussed in this post.

The Trade Framework Agreement

Last year’s handshake trade framework agreement – the Turnberry Agreement, for where the agreement was reached – was intended as a first step in a process to improve market access and increase the US-EU trade and investment relationship. Specific to the CSDDD and CSRD, the US-EU joint statement on the Turnberry Agreement included the following:

“The European Union commits to undertake efforts to ensure that the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) do not pose undue restrictions on transatlantic trade. In the context of CSDDD, this includes undertaking efforts to reduce administrative burden on businesses, including small- and medium-sized enterprises, and to propose changes to the requirement for a harmonized civil liability regime for due diligence failures and to climate-transition-related obligations. The European Union commits to work to address US concerns regarding the imposition of CSDDD requirements on companies of non-EU countries with relevant high-quality regulations.”

The Turnberry Agreement is further discussed in this Ropes & Gray post.

The US Government Comments 

The US has had concerns about the scope and potential impact of the CSDDD and CSRD since the proposal stage and there have been various initiatives to limit its impact on US-based multinationals. Some of those initiatives are discussed in this Ropes & Gray post.

Subsequent to the Turnberry Agreement, the EU’s Omnibus I simplification process resulted in changes to the CSDDD and CSRD. CSDDD compliance thresholds were raised, compliance deadlines were pushed back, due diligence was shifted to a more risk-based approach, the climate transition plan requirement was eliminated and the EU harmonized liability regime was scrapped. 

CSRD compliance thresholds also were raised, reporting was pushed back or eliminated for many companies and disclosure requirements were scaled back. These and other amendments to the CSDDD and CSRD are further discussed in this Ropes & Gray post. The US Government’s comment submission makes clear that the Omnibus I changes do not fully address US concerns. 

As a general matter, the US Government remains concerned about the extraterritorial reach of the CSDDD and CSRD and the costs and burdens they place on US companies. As in any negotiation, expect give and take on both sides. However, the submission indicates that the “United States will take any actions necessary to address unreasonable burdens on U.S. commerce absent a solution that addresses these concerns.” In addition, the US has left the door open for additional comments. Media sources indicate that a joint US-EU statement addressing the non-tariff aspects of the Turnberry Agreement may be released in the fall.

For US-based multinationals, the most important near-term take-away is to consider whether and how to further engage with US and EU policymakers on the CSDDD (and to a lesser extent the CSRD) at this critical juncture.

The US Government is not the only one commenting on the CSDDD. The European Commission held a public consultation to inform its development of guidelines to support the effective implementation of the CSDDD. That consultation closed Friday. The Commission received over 400 comments, including 23 from the United States. The guidelines consultation is discussed in this Ropes & Gray post.

The US comments are further discussed below. The thematic headings and order generally track the submission. 

Scope

As an overarching comment, the US Government is asking the EU and its Member States to significantly limit CSDDD and CSRD reporting and due diligence requirements on US businesses. More specifically, the application of the CSDDD should be limited to the activities of the EU subsidiaries of US businesses or the EU business partners of US businesses and to goods that are produced in, or services that are supplied from, the European Union.

The US Government has the following more granular scope-related comments. Most relate to the CSDDD:

• The comments take exception with the broad scope of the CSDDD. They note that US companies and their subsidiaries with no physical presence, operations, employees or assets in the EU could fall within the scope of the CSDDD even if they do not do business in the EU or engage in any activity with foreseeable, direct effects in the EU market. The US asserts that, since these entities do not intend to place products on the EU market, they should not be subject to due diligence and reporting requirements for operations that do not directly touch EU borders or consumers. The submission cites as an example a US subsidiary or supplier to an EU-headquartered company in scope of the CSDDD that produces products exclusively in the US, for US consumers only.

• The EU should narrow the scope of the CSDDD to EU-domiciled businesses by eliminating CSDDD Article 2.2(a) through (c). These clauses contain the scoping thresholds applicable to companies formed in accordance with third-country legislation (i.e., that of a non-EU country). The impact of this change would be to narrow the CSDDD to EU subsidiaries of US-based multinationals. High-quality US state corporate governance regulations and federal laws requiring supply chain due diligence, and resulting duplicative and potentially conflicting obligations, are cited in support of this comment.

• The due diligence requirements in Articles 7 through 17 should apply only to activities and products linked to the EU market. Expanding on this, the comments indicate that producers and farmers who do not purposefully avail themselves of the EU market and whose products are not sold there should not be subject to audits or information requests under the CSDDD. The US believes that extending requirements to unrelated upstream producers and farmers creates disproportionate and unjustified burdens, especially for small and medium-sized enterprises. 

• The US is requesting that forthcoming European Commission guidance defining the risk-based supply chain assessment process designate the US as a negligible risk jurisdiction given its robust corporate governance framework. The US is requesting that there be “presumed compliance” for companies operating in high-quality regulatory jurisdictions such as the US, and that reporting and due diligence requirements for firms operating in countries with robust corporate governance and supply-chain mapping regulations be eliminated. Similarly, the US has been designated as a low risk country under the EU’s Deforestation Regulation, which allows for simplified due diligence under that Regulation (see this Ropes & Gray post).

• Implementing guidance should narrow the definition of “stakeholders” under Article 3 of the CSDDD. The US believes that the reference to “individuals or communities whose rights or interests are or could be directly affected” is speculative and overly broad and should include an element of reasonable foreseeability to avoid creating overly burdensome requirements, including consultation requirements, for companies. 

• Regarding supervisory authorities in CSDDD Article 24, implementing guidance should further clarify the definition of “net turnover” in Article 3 and throughout the CSDDD. Turnover is used to determine the competent supervisory authority for third-country companies. The comments also indicate that implementing guidance should specify procedures for a company to request to change the supervisory authority when circumstances warrant. 

• The EU should clarify the permanence of the approach for financial firms that the CSDDD’s due diligence obligations only apply to these firms’ upstream business partners, regardless of a financial firm’s legal or investment structure.   

Compliance Obligations

These comments relate largely to the due diligence obligations under the CSDDD. They partially overlap with other comments raised by the US government that are discussed in other parts of this post.   

• Implementation should support the CSDDD’s risk-based approach under Articles 5 and 7. Any action under the CSDDD should be evidence-based and draw on credible sources and in consultation with the affected entity.

• The EU subsidiary or firm located in the EU, and not the parent company located in a third country, should be responsible for due diligence and related enforcement in order to avoid duplicative compliance structures.

Enforcement 

• The criteria for setting fines should only take into account revenue from activities in the EU. The US believes that basing fines on worldwide turnover creates the opportunity for abusive fines with extraterritorial impact. The comment cites Article 27(4) of the CSDDD, which requires that Member States ensure that maximum pecuniary penalties are set at 3% of the net consolidated worldwide turnover of the ultimate parent company.

• The comments emphasize that verification measures under the CSDDD, including audits, site visits and stakeholder engagement, should be risk-based and only undertaken where authoritative domestic findings demonstrate a credible and documented risk that cannot be adequately assessed through less burdensome means. This comment goes on to indicate that the CSDDD should not require on-site audits of upstream suppliers that do not directly supply an EU buyer. 

• The US also has concerns with the verification body approach contemplated by Article 20(5). That Article allows companies to use independent third-party verification to support their due diligence. The comments express the concern that the unregulated nature of this system could lead to inaccurate and inconsistent reports and under-qualified assessors since, although the provision establishes basic parameters for verifiers, it does not include an oversight mechanism. The comments note that US companies have raised concerns that customers already have threatened to terminate contracts based on information from inaccurate verification reports produced by unreliable third-party verifiers. The US is encouraging the EU to issue detailed guidance and to establish oversight by Member States to ensure that third-party verification reports are accurate, effective and free of conflicts of interest. The US also is suggesting that the European Union ensure verifiers are independent, accredited and maintain sufficient sectoral expertise to assess compliance. 

Litigation

Article 29 of the CSDDD gives Member States the discretion to allow for private rights of action against companies that fail to comply with their due diligence obligations.

• Like many other commentators within and outside the EU, the US Government is concerned that in-scope companies operating in Europe could face a wave of civil litigation in Member State courts when the CSDDD comes into effect, with the potential for inconsistent and conflicting interpretations across national court systems and supervisory authorities. To create consistent, balanced and practical expectations for investments, the US is requesting that the EU take a regulator-led approach to promote consistent and predictable enforcement by allowing civil claims to proceed only after the appropriate supervisory authority has assessed compliance and concluded that the company has failed to comply with the relevant obligations. In addition, the comments urge that, if a civil claim is allowed, Member States should require plaintiffs to demonstrate direct links to harm occurring in or materially affecting the EU.

• The US also is requesting that EU Member States refrain from creating new procedural avenues for litigation.

Net Zero 

As earlier noted, the requirement to put in place a climate change mitigation transition plan (Article 22) was deleted from the CSDDD as part of Omnibus I.

• The US wants this deletion to be respected. It does not want to see mandatory net zero climate transition plans and related requirements reintroduced via guidance. The comments express this concern in the context of OECD voluntary guidelines replicated in the CSDDD that refer to environmental requirements and net zero commitments.

• The US also is concerned about these requirements being added back in through Member State transposition. The comments indicate that Member States should not refer to or require compliance with OECD guidelines not listed in the CSDDD.

What About the CSRD?

As described above, the Turnberry Agreement commitment also extends to the CSRD. Under that Agreement, the EU committed to undertake efforts to ensure that the CSRD does not pose undue restrictions on transatlantic trade.

Most of the US Government’s comments pertain to the CSDDD. However, the submission indicates that, since the CSDDD and CSRD have significant interoperability, complementarity and overlap, particularly in reporting, it is important for the EU to address the directives collectively. 

Comments specific to the CSRD include the following:

• The US Government has concerns relating to the CSRD’s impact-based materiality reporting and double materiality standard, which differs from the single financial materiality standard under US law.

• The US also is concerned about the reporting burden for non-EU companies with minimal links to the EU market. The comments indicate that reporting requirements should not apply to operations that do not directly touch EU borders or consumers.

• More generally, the comments ask the EU to significantly limit CSRD reporting and enforcement against US businesses. 

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