What the EU-US trade agreement means for sustainability rules

EU and US negotiators have finally agreed on a framework for a trade deal – with significant concessions made by the EU around sustainability reporting and carbon border adjustment. 

The ‘Joint Statement on a United States-European Union on an agreement on reciprocal, fair and balanced trade’ – published on August 21 after weeks of negotiations following the tariff war started by US President Donald Trump – lays out the details of a new trade deal between the two regions, with a clear advantage given to the US in exchange for a 15% tariff ceiling.

It includes terms giving US agricultural producers preferential market access in Europe, while stating that EU companies will invest US$600 billion across strategic sectors in the US by 2028, and that the EU itself will purchase US$750 billion worth of energy products and US$4 billion worth of AI chips – as well as increasing defense procurement from the US.

Reducing the impact of CSRD and CSDDD for US firms

But the deal also includes provisions to reduce the impact of the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and Carbon Border Adjustment Mechanism (CBAM) on US companies – which sustainability professionals are finding worrisome.

“Very worryingly among the details of the deal, on CSDDD the EU appears to be committing that it will reduce the impact of the civil liability regime, maintain the weakening of the climate transition plans, and apparently address (maybe even limit) the impact of CSDDD on US companies. Since when did trade deals take away the sovereignty of EU co-legislators and pre-suppose the content of EU laws?” commented Richard Gardiner, Head of EU Policy at ShareAction.

Specifically on CSDDD the agreement states that the EU will undertake efforts to reduce the administrative burden on businesses including SMEs, and “propose changes to the requirement for a harmonised civil liability regime for due diligence failures and to climate-transition-related obligations”.

The announcement could be foreboding of what’s to come when Omnibus negotiations to amend CSRD and CSDDD resume in September.

Additional flexibilities for CBAM

Beyond sustainability reporting and due diligence rules, the joint statement also mentions “additional flexibilities” for US exporters under CBAM – “taking note of the US concerns related to treatment of US small and medium-sized businesses”.

In its FAQ on the announcement, the EU clarifies that “we have not committed to change CBAM in any specific way, nor to provide more favourable treatment to US companies under CBAM”, but that the flexibilities will be applied to implementation.

This will be in addition to the recent exemption of around 90% of EU importers from having to comply with the scheme.