EXCLUSIVE: Senate Banking Chairman Tim Scott rebukes the EU’s sustainability mandates

Sen. Tim Scott (R., S.C.) explains the problems with the EU's push for sustainability mandates.

Senate Banking Committee Chairman Sen. Tim Scott (R., S.C.) is urging U.S. Trade Representative Jamieson Greer and the Trump administration to take a hard line against sweeping European Union (EU) “sustainability” mandates that Republicans say amount to backdoor regulation of American businesses by foreign bureaucrats.

“Europe’s latest sustainability mandates may be drafted in Brussels, but they land on Main Street in South Carolina and across America,” Scott said. “When the EU’s ideologically driven regulatory experiments reach our supply chains and impose requirements on our businesses, that’s a direct challenge to American workers and our sovereignty. That’s why the EU should indefinitely pause these rules, to prevent burdensome foreign regulations from being imposed on American businesses.”

In a letter, Scott called on the administration to push the EU to indefinitely pause its Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), warning that the rules operate as non-tariff trade barriers that undermine U.S. economic competitiveness and national sovereignty.

Scott praised the administration’s efforts to advance a “Framework on an Agreement on Reciprocal, Fair, and Balanced Trade” with the EU, noting that the EU has acknowledged the directives should not “pose undue restrictions on transatlantic trade.” But he warned the rules remain a direct threat to American companies unless fully paused.

At the center of the dispute is CSRD’s so-called “double materiality” standard, which Republicans argue departs from long-standing U.S. financial disclosure norms. Under the directive, companies would be forced to report not only financially relevant information, but also subjective environmental and social impacts, disclosures that critics say may have little relevance to investor decision-making.

Republicans warn the mandate could force roughly 3,000 U.S. companies to report more than 1,200 separate data points, driving up compliance costs that would ultimately be passed on to consumers.

The burden would not stop with public companies. Privately held American firms that merely conduct significant business in Europe could be required to disclose proprietary information, potentially exposing sensitive business data to competitors and foreign regulators, an intrusion lawmakers warn would discourage U.S. firms from engaging with the EU altogether. As NAM’s Managing Vice President of Policy Charles Crain told the Reporter, the directive “would impose new compliance costs throughout U.S. supply chains, which would increase the prices of many products sold in America,” potentially totaling up to $1 trillion in new costs.

Scott also warned that the EU’s directives would erase long-standing distinctions in U.S. corporate governance law, particularly protections afforded to privately held companies, while subjecting American businesses to foreign disclosure mandates.

“Republicans are ending the Biden era of burdensome international regulations that handicapped American companies. President Biden looked the other way while other countries forced Green New Deal policies that made everything more expensive,” a GOP campaign operative told the Reporter.

The CSDDD raises even deeper concerns. The directive would require companies with sufficient EU ties to police their entire global supply chains for alleged environmental and human-rights violations — obligations Scott describes as “unduly burdensome, if not impossible, to comply with.”

Critically, the rules also expose American firms to foreign lawsuits over conduct that is fully legal under U.S. law. Republicans pointed to a recent case in which the United Auto Workers sued Mercedes-Benz under German law over operations at an Alabama manufacturing facility, a move they say represents a direct threat to U.S. sovereignty.

Sen. Tom Cotton (R., Ark.), previously told the Reporter that the EU’s sustainability rules amount to an attempt to impose foreign economic policy on American companies.

“The EU is trying to export their disastrous economic model to Arkansas by forcing American companies to comply with supply chain and climate rules that their representatives have firmly rejected,” Cotton told the Reporter. “I have deep concerns about this infringement on American sovereignty.”

Concerns over the EU’s extraterritorial reach are not limited to the GOP. Former Treasury Secretary Janet Yellen testified in 2023 that the Biden administration was “concerned” the CSDDD’s scope could create “unintended negative consequences for U.S. firms.”

Recent developments in Europe, such as raising company size thresholds, dropping climate-transition plan requirements, and delaying major reporting deadlines, appear to validate Republican warnings. Facing mounting economic pressure, EU lawmakers and member states recently agreed to scale back elements of the CSRD and CSDDD after acknowledging the rules were harming competitiveness. The revised framework sharply raises the thresholds for companies subject to the directives and strips out several climate-transition requirements.

Industry groups in the U.S. have warned for years that the directives would impose European-style ESG mandates on American firms, raising costs, chilling investment, and driving manufacturing overseas.

Republicans argue the stakes go beyond compliance costs, touching everything from energy prices to supply-chain stability and U.S. workers’ livelihoods.

Scott says the Trump administration should use ongoing trade negotiations to halt the directives altogether, warning that failure to do so would invite further foreign interference in U.S. business practices and weaken America’s negotiating position abroad.

The White House and USTR face a choice between acquiescing to increased EU demands and risking rising domestic backlash, or pushing back to defend American business sovereignty. Many Republicans say the choice is clear: defend American companies and workers, or allow unelected EU regulators to dictate how U.S. businesses operate at home.