U.S. warns EU sustainability rules still burden American commerce

The U.S. government has lodged a formal objection to the European Union's sustainability reporting rules, telling Brussels that the effort to simplify them did not go far enough. Washington says it will take “any actions necessary” if the burden on American commerce stands. The warning arrived in a comment letter from the U.S. Mission to the European Union, reported by ESG Today on August 17.

The letter targets the EU Commission's Omnibus package, the revision meant to soften two directives: the Corporate Sustainability Due Diligence Directive and the Corporate Sustainability Reporting Directive. In the U.S. reading, the package “failed to fully address U.S. concerns” and left the directives with too much reach over companies outside the EU.

The CSDDD began as a Commission proposal in 2022. It was adopted two years later. Its obligations were sweeping: companies had to identify, prevent, and remedy harms to people and the environment in their upstream supply chains and some downstream activities. The list ran from child labor to pollution to deforestation. The Omnibus raised the entry threshold. Under the original rule, a company fell in if its headcount was above 1,000 employees. The Omnibus moved that line to more than 5,000 employees. It also set a revenue floor of €1.5 billion. And it removed the requirement to prepare climate transition plans.

The CSRD ran a parallel course. It took effect for large EU companies in 2024. The plan was to pull large non-EU companies operating in the EU into the regime five years later. The Omnibus slashed the mandatory data points. It also shrank the non-EU group in scope. The original estimate was around 10,000 companies. After the revision, roughly 1,200 remained.

The scale-down followed a transatlantic understanding. In August 2025, the U.S. and EU announced a Framework Agreement. The EU committed to make sure the directives “do not pose undue restrictions on transatlantic trade,” including by lowering the administrative burden on business. The new letter says the effort came up short. The warning is explicit: “The United States will take any actions necessary to address unreasonable burdens on U.S. commerce absent a solution that addresses these concerns.”

The letter's list of concerns gives the shape of the disagreement. It points to the directives' “extraterritorial reach and costly and onerous supply chain due diligence obligations,” and it calls out the EU's “double materiality” standard. The wording suggests the argument has moved past how many data points a company must disclose. The core dispute is who gets to decide what a company reports about its own impact.

The numbers help explain the complaint. The original non-EU cohort for the CSRD was roughly 10,000 companies. The Omnibus cut it to about 1,200. That is a real narrowing. But the supply chain logic of the CSDDD means the rule is felt upstream, at companies that never file a report themselves. The due diligence duty runs into the supplier base. A supplier in the United States can sit inside a European customer's reporting obligation.

The letter does not enumerate the actions Washington is contemplating. The warning is broad — “any actions necessary” — and that breadth is deliberate. The U.S. has chosen the comment-letter route, which keeps the dispute inside the regulatory process rather than moving it to trade retaliation, at least for now.

For companies waiting on the 2029 reporting year, the conflict changes the planning math. The CSRD schedule has not moved. The Omnibus has already set the requirements and thresholds that will apply. Compliance teams that built systems for the first version of the rules have already spent once. Those waiting to build for the Omnibus version may wonder whether the rules will survive in their current form.

The letter is careful to frame the disagreement as one of burden. It asks for a “solution” to “unreasonable burdens,” not for the withdrawal of the directives. That language leaves room for another round of EU rulemaking. The EU originally covered roughly 10,000 non-EU companies. The Omnibus cut that to about 1,200. The American position is that the movement was not enough.

The letter, as reported, stops short of naming a deadline or a specific response. That leaves the next move to negotiation, and it leaves affected companies to build against a rule that may change. A second EU simplification would restart debates that the first round barely settled. The letter gives Brussels room to respond without being forced to capitulate.

For the roughly 1,200 non-EU companies still inside the CSRD, the fight over thresholds may be the least of it. The real exposure is 2029, the year their reporting obligation arrives. If Washington wins its point, that year will bring a different rule. If Brussels holds its ground, it brings the rule that exists now, wrapped in a transatlantic fight. The companies affected will build their compliance programs before either answer is certain.