Slashing Sustainability: US Moves to Usurp EU Green Rules
10 October 2025
The US has thrown down a new gauntlet on the EU’s green rules, requesting that the bloc significantly diminish aspects of its sustainability-focused legislation at the same time as the European Commission’s first omnibus package approaches its crescendo.
The new challenge has been issued despite the EU agreeing to reduce the impact of its Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD) on US companies in a trade agreement signed in August, as reported by Minerva Analytics. The wide-ranging agreement also contained terms on the European Union Regulation on deforestation-free products (EUDR) and the treatment of US small and medium-sized businesses (SMEs) under the EU’s Carbon Border Adjustment Mechanism (CBAM).
A US government position paper reported on by the Financial Times includes Washington demanding that Brussels remove requirements for non-EU companies to provide “climate transition plans”. The document additionally requested that the EU alter its environmental legislation on supply chains to exclude US companies and others from “countries with high-quality corporate due diligence”.
Washington has reportedly shared its demands to the European Commission in recent days, with the US “not offering concessions in return”. This was despite the EU previously stating that the trade agreement represented a “concrete demonstration of our commitment to fair, balanced, and mutually beneficial trade and investment” and could be further expanded in future.
The US has this year waged war on ESG and sustainability since President Donald Trump took over for a second term. To name just a few examples, this has included withdrawing from the Paris Agreement for a second time shortly after taking office, coining the phrase “drill, baby, drill” while pushing for greater oil and gas production domestically, cutting U$7.6 billion in grants for clean energy projects in Democratic states and lashing out at wind power in other countries.
This week, an investigation by non-profit Public Citizen found that 111 executive branch nominees and appointees had either worked in fossil fuels-linked roles or were hostile towards renewable energy. This comprised 43 former fossil fuel industry employees, 29 former corporate executives, 14 former corporate lawyers, 12 people tied to fossil fuel-funded right-wing think tanks, seven people tied primarily to Republican politics such as elected officials and staffers pushing fossil fuel interests and six from utility companies or the nuclear energy industry,
Separate analysis from Climate Power published in January found that Big Oil had spent U$450 million to influence Donald Trump and Republicans throughout the 2024 election cycle, with the funding including direct donations, lobbying, and advertising to support Republicans and their policies.
Coincidentally, data published by global energy think tank Ember published this week showed that renewable energy overtook coal as the world’s leading source of electricity in the first half of this year for the first time.
Under the trade agreement signed between the EU and US, the former pledge to “ensure” that the CSRD and CSDDD “do not pose undue restrictions on transatlantic trade” as one of 19 key terms of the trade agreement with the US. Under key term 12 of the agreement, the EU intends to undertake efforts to reduce perceived administrative burdens on businesses arising from CSDDD.
This includes small- and medium-sized enterprises, and the EU has also proposed changes to the requirement for a harmonised civil liability regime for due diligence failures and to climate-transition-related obligations. Some American companies have claimed that the CSRD and CSDDD requirements would necessitate ceasing their operations in the EU.
This week, 46 German and French CEOs have reportedly written to German Chancellor Friedrich Merz and French President Emmanuel Macron calling for the “full abolishment” of CSDDD, claiming that the move would act as a “clear and symbolic signal to European and international companies that the governments and the Commission are really engaged to restore competitiveness in”
The letter was signed by the CEOs of TotalEnergies and Siemens on behalf of all 46 CEOs and suggests that despite the CSDDD being poised to be heavily watered down by the omnibus some of the few remaining in scope are still pushing for a greater reduction in requirements or the scrapping of the directive entirely.
The CSDDD aims to promote sustainable and responsible corporate behaviour both in companies’ operations and throughout their global value chains. Meanwhile, the CSRD looks to enhance the availability and reliability of sustainability information while fostering a culture of transparency regarding companies’ impact on people and the environment.
Both the CSRD and CSDDD look set to be significantly watered down the European Commission’s Omnibus directive. The left-wing Socialists and Democrats (S&D) party this week acceded to the demands of the European People’s Party (EPP), the largest party in both the European Council and Parliament and the party of European Commission President Ursula von der Leyen.
The S&Ds were the major holdout on an agreement to weaken the directives, but after the EPP threatened to align with Europe’s far-right political groups in the upcoming votes on the omnibus they gave way. The proposal from the right-wing parties would have seen the scope of the CSRD further reduced, the removal of climate plans from the CSDDD and no EU-wide civil liability regime. The S&D’s lead negotiator on the omnibus file Lara Wolters resigned in protest.
Under the version of the omnibus agreed by the European Parliament, the CSDDD’s thresholds are set to increase to 5000 employees and €1.5 billion (U$1.7 billion) net turnover. This would mark a significant shift from the directive’s original thresholds of companies with more than 1,000 employees and a worldwide turnover surpassing €450 million, representing a roughly 70% decrease of the number of companies from the scope of the directive.
Meanwhile, CSRD will only apply to companies with 1000 employees and a net turnover threshold of over €450 million, removing roughly 90% of companies the scope of the directive, particularly listed small and medium enterprises.
These changes would align with the negotiating mandate that the European Council agreed to in June to “simplify” sustainability reporting and due diligence requirement as part of the European Commission’s first omnibus package, as reported by Minerva Analytics.
“It is good to have a deal as this reduces uncertainty, but the message is very troubling: threats now seem to be the regular way of handling things within the ‘[Ursula] von der Leyen majority’,” said Andreas Rasche, Professor at Copenhagen Business School. “The final outcome feels less like consensus and more like capitulation. Lara Wolters, S&D’s lead on the omnibus file, resigned as negotiator in protest.”
He added that the deal “may bring closure – but at a very high cost for sustainability and for the credibility of the ‘von der Leyen majority’ in the Parliament”. Rasche also branded the cutting back of CSDDD as “unacceptable”, noting that this “makes due diligence only relevant to a few very large companies, and even these very few will face no common civil liability regime”.
On Monday 13 October, there will be a vote in the European Parliament Committee on Legal Affairs, followed by plenary vote in the Parliament the week after. This is set to be followed by the trilogue negotiations in November and December to negotiate a final legal text with the reduction in the scope of the directives incorporated.
Ahead of the vote, a coalition of more than 30 former EU leaders, Commissioners and major industry representatives have joined forces in an attempt to prevent the Omnibus legislation vote from passing, sending a joint letter urging the EU to uphold the robust sustainability regulations which the CSRD and CSDDD offer.
The US-EU trade agreement also encompassed the EUDR, stating that the US “poses negligible risk to global deforestation”, with the EU committing to “work to address the concerns of US producers and exporters regarding the EU Deforestation Regulation, with a view to avoiding undue impact on US-EU trade”.
The European Commission is poised to delay the long-awaited EUDR by another year citing IT system issues, as reported by Minerva Analytics at the end of last month. Based on the initial timeline for the EUDR, if stuck to the law would now come into effect for large companies from 30 December 2026 and 30 June 2027 for micro- and small enterprises.
The delay has again aggravated concerns about the law being weakened and the damage that could be done in leaving companies largely unchecked for a further year, especially given the direction of travel on sustainability-related issues this year.
On top of the recently agreed increase of the de minimis exception to reduce administrative burden for SMEs, the agreement also saw the European Commission commit to provide “additional flexibilities” in the implementation of CBAM for US companies.
As part of the agreement’s key terms, the EU will purchase US liquified natural gas, oil, and nuclear energy products with an expected offtake valued at U$750 billion through 2028. The EU has additionally pledged to purchase at least U$40 billion worth of US AI chips for its computing centres. European companies will be expected to invest an additional U$600 billion across strategic sectors in the US through 2028, with the sectors benefitting from this investment yet to be specified.
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Last Updated: 10 October 2025