EU–US Trade Pact Sparks Tensions Over Sustainability Rules

The recently hashed-out EU–US trade agreement includes a key commitment from the EU to ensure that its Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) do not impose “undue restrictions on transatlantic trade.” As part of this pledge, Brussels has agreed to ease administrative burdens related to due diligence requirements-especially for SMEs-and propose revisions to civil liability frameworks and climate transition mandates

Critics have responded sharply. Aurore Lalucq, head of the European Parliament’s Economic and Monetary Affairs Committee, condemned the deal as a loss of sovereignty. Experts, including a Copenhagen Business School professor and ShareAction’s interim EU policy head, echoed concerns that the agreement signals a willingness to ""downscale"" sustainability regulations

This move builds on broader efforts to simplify EU sustainability laws through the ongoing Omnibus package. Notably, proposals under discussion would dramatically raise thresholds for CSRD and CSDDD applicability-raising employee and turnover thresholds to 5,000 and €1.5 billion (from 1,000 and €450 million respectively)-potentially excluding around 85% of companies from CSRD coverage.

The proposed Omnibus thresholds - raising CSRD and CSDDD applicability to 5,000 employees and €1.5 billion turnover - would potentially exclude approximately 85 percent of previously in-scope companies. This would dramatically narrow the practical reach of EU sustainability disclosure regimes, redirecting compliance obligations toward only the largest multinationals.

The dual signal - trade-agreement flexibilities plus threshold increases - creates real uncertainty for corporates that have invested in CSRD/CSDDD compliance infrastructure based on earlier regulatory design. Investor and civil-society concerns about erosion of EU sustainability leadership are legitimate, but the political imperative to reduce compliance burden on smaller firms is also real.

For corporates preparing for or already reporting under CSRD/CSDDD, financial institutions with cross-border operations, and their advisors, Cognitud's ESG strategy and transformation, sustainability due diligence and market intelligence teams help clients navigate the evolving regulatory landscape, evaluate exposure to threshold changes, and prepare disclosures aligned with both current and prospective requirements to protect long-term competitive positioning.