Back in March, Lawrence wrote about the potential for tariffs and trade policy to weaken EU sustainability legislation – particularly, those that impose obligations on non-EU companies. Now, details emerging from the US/EU Framework on an Agreement on Reciprocal, Fair, and Balanced Trade (“the Agreement”) indicate that Lawrence’s prediction is coming true. A recent memo from Ropes & Gray reveals that the Agreement specifically touches on how EU sustainability laws will be applied to US companies. Few concrete details exist on how those laws will be changed:
“At this early juncture, it is not clear what all of this will mean in practice. As discussed in this post, the EU already is on its own initiative scaling back the EUDR, CBAM, CSRD and CSDDD, as part of its drive to enhance the competitiveness of the EU bloc. Therefore, it remains to be seen what additional changes the US will seek… In the coming weeks and months, there will be more visibility on the parties’ specific, more granular negotiating positions. In the meantime, the Framework Agreement is likely to be used as an additional justification by the pro-simplification camp within the EU for trimming ESG/CSR related compliance requirements.”
The agreement indicates that the EU will work to alleviate pressure on US companies stemming from multiple EU sustainability laws, including the European Union Deforestation Regulation (EUDR), the Carbon Border Adjustment Mechanism (CBAM), the Corporate Sustainability Due Diligence Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and EU forced labor laws. Some laws, like the EUDR, may be amended to include US-specific carve-outs, while others may be simplified more generally to reduce non-EU company compliance obligations. We won’t know how influential US trade pressure is until detailed amendments to these directives are released, but sustainability appears to be a major sticking point in ongoing trade negotiations.
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