During a recent U.S. Senate hearing, Howard Lutnick stated that the Corporate Sustainability Due Diligence Directive would place significant burden on companies in America. Lutnick, who was selected by President Trump to fill the Secretary of Commerce position, explained that they were looking to use available trade tools to challenge these regulations.
He added that he’d take whatever action was necessary to prevent the imposition of rules that negatively affected American firms.
The Corporate Sustainability Due Diligence Directive is a measure adopted by the EU to promote responsible behavior by companies, focused on adherence to environmental standards and human rights across international value chains. Its primary objective is to encourage firms operating in the EU to cultivate more respect for sustainability and green criteria.
The directive was enacted in 2024 and makes it compulsory for large firms to identify, mitigate, and/or prevent adverse impacts resulting from their operations, business partners, and subsidiaries. These regulations weren’t expected to resonate with American multinationals, given the push back against ESG observed these past few years.
Under the measure, an American company that wants to operate in Europe would need to ensure that its supply chain is free from gender discrimination, worker exploitation, environmental damage, and child labor. This is in addition to implementing plans to transition to carbon neutrality. The directive also imposes stringent sustainability reporting obligations on firms with revenues higher than $150 million or those with branches and subsidiaries.
Some argue that America wants to sell its products and services to the rest of the world without complying with these regulations. Given Donald Trump’s latest statements and stance on matters ESG, there’s little hope that America will get on board this particular train.
It doesn’t help that various right-wing and center-right parties in the U.S., as well as France and Germany continue to ask that the regulations be amended, with many arguing that they’re too costly and complex. Companies that fail to comply with these regulations following their enactment could face legal action as well as sanctions totaling up to 5% of their turnover.
It remains to be seen whether America will emerge victorious in the trade war it’s launched against the world, or if the EU will stick to its stance on the matter.
In other news, the EU is planning to unveil the Omnibus Package, which contains revisions to the Corporate Sustainability Due Diligence Directive, the Taxonomy Regulation, and the Corporate Sustainability Reporting Directive later this month. The package discusses economic activities that can be classified as sustainable.
North American firms like Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) will be watching how the disagreements between the U.S. and the EU over ESG implementation are sorted since such issues have the potential to affect markets.
NOTE TO INVESTORS: The latest news and updates relating to Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) are available in the company’s newsroom at https://ibn.fm/RFLXF
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