US preparing to take down Europe’s due diligence law 

EU policymakers have been warned that the bloc’s new due diligence law will be a takedown target for Donald Trump when he returns to office as US President. 

Speaking at an event about the Corporate Sustainability Due Diligence Directive (CS3D) in Brussels this week, Luca Enriques, a research fellow at the European Corporate Governance Institute, said there was “a non-trivial chance that the forthcoming US presidency will pick this fight”.

CS3D seeks to hold large companies, including North American ones with significant operations in the EU, accountable for human rights and environmental breaches that occur as part of their business activities. That includes harms taking place in their supply chains as well as their direct operations.  

Enriques challenged the law’s reliance on EU-backed standards and conventions “many of which have never been signed or ratified by the US”. 

He described CS3D as “a red rag for Donald Trump” if he became aware of it. 

Speaking at the same event, Evan Williams from the US Chamber of Commerce said Trump is expected to be made aware of the law as soon as he returns to office, and a campaign is already underway to unpick it. 

“Lawmakers in our House of Representatives and in the United States Senate are already aware of this issue [and] have already written to the administration about this issue, and I anticipate will be writing again once the president has formally taken power,” said the vice president of corporate governance and financial reporting at the Chamber’s centre for capital markets competitiveness. 

CS3D is one of three sustainability-related regulations the European Commission has pledged to revise next year, to make life easier for companies.

There are concerns that re-opening the laws – which is expected to be done via a single legislative proposal known as an ‘omnibus’ – will result in significant reductions in their scope and ambition.

Williams suggested “there is a great opportunity in the omnibus legislation to anticipate retaliatory action and take proactive steps to try to reduce the chances that there will be need for retaliatory action from the United States”. 

He pointed to the 1974 Trade Act, which allows a US president to impose sanctions on countries with “unfair” foreign trade practices. 

“Not that I think that that’s a lever that will be pulled in this particular circumstance, but it is a lever nonetheless, and one to be wary of as broader discussions on the trade relationship between the US and the EU continue,” Williams warned.  

The roundtable was held by Brussels-based think-tank the European Roundtable on Climate Change and Sustainable Transition (ERCST), which on Monday launched a report on how to improve CS3D.

One of the authors, Michael Mehling, said there was “a real risk that if measures like this are brought to the attention, for instance, of President Trump, in the next four years, they become something he suddenly sinks his fangs into… and you start to see a real house of cards collapse into itself”. 

“As one measure is challenged, the next one is suddenly challenged – the CBAM becomes vulnerable, CSRD becomes vulnerable,” he continued, referring to the EU’s new carbon levies and sustainability reporting rules. 

“It’s not necessarily that we’re saying it’s too ambitious, but there is a risk of moving to a point where the ambition becomes something others see as a target and something to destabilise,” Mehling said.  

Pedro Colares, a diplomat with Brazil’s foreign ministry, said CS3D was also “seen as very problematic” in Brazil, and the government has received complaints from “stakeholders”.