Dive Brief:
- House Financial Services Chair French Hill, R-Ark., said last week that he would like to see European Union corporate disclosure regulations like the Corporate Sustainability Due Diligence Directive treated like a “non-tariff barrier” for U.S. corporations.
- Hill made the comments Thursday during a webinar hosted by the American Council for Capital Formation, a bipartisan economic policy-focused trade association. The committee chair added that he believes it should be a priority for the Secretaries of Treasury and Commerce to address the EU laws’ impact on U.S. companies.
- The EU’s CSDDD was signed into law last year and requires large companies operating in the bloc to detail and remedy any negative impacts on the environment or human rights caused by their own activity in their supply chain.
Dive Insight:
Hill will have a large influence on the direction of the nation’s financial industry oversight and legislation for the next two years from his perch as chair of the influential House Financial Services Committee. While Republicans have unified control of the White House and Congress, any legislation put forward will have to pass through a slim House majority to reach President Donald Trump’s desk.
This is Hill’s first time leading the committee, taking over after former Chair Patrick McHenry, R-N.C., retired after the last Congress. The new Financial Services Chair said on the Feb. 13 webinar that the EU’s sustainability reporting laws, and specifically the CSDDD, will create costly barriers for U.S. corporations to do business in and engage with the bloc.
“You're creating another standard that could see our biggest companies with their sales and leadership disqualified from financing or disqualified from business outside the U.S.,” Hill said. “I think America wants to be engaged with our colleagues in Europe on so many issues, but we have to make sure that we put our own interests first and not confuse what harmonization is.”
The CSDDD will require non-EU companies with more than 450 million euros ($468.7 million) in revenue to comply. In addition to disclosing and remedying any environmental or human rights harms from the companies or their supply chain, companies will also be required to adopt transition plans aligned with the Paris Agreement’s target of limiting temperature rise to 1.5 degrees Celsius. Disclosures will first be expected between 2027-29, based on company size and revenue.
Hill said such mandates are costly for U.S. businesses and disproportionately hurt them, as opposed to other multinational companies, due to the longstanding relationship between the U.S. and Europe.
“I think it should be treated as a non-tariff barrier when we're talking to our EU counterparts about trade,” Hill said. “That's effectively what this is when you impose that kind of extraterritorial approach.”
Hill said he believes disclosures should be driven by “what the company thinks is in the best interest” to disclose based on material impact and relevant securities laws. However, he believes a flaw in the European approach is “one size here does not fit all.”
“In America, we've simply said we want every business to reflect on sustainability goals [and] their direct impact on decarbonization, if that's something that's important to them,” Hill explained. “And we've done it by saying, ‘If it's material, then you ought to disclose it in your financial statements.’”
As far as the status of sustainability-focused regulations in the United States goes, acting Securities and Exchange Commission Chair Mark Uyeda moved last week to delay arguments in the lawsuits over the agency’s climate risk disclosure rule. The move indicates the agency as formulated is not inclined to defend the rules in court, though Stephen O’Day, a partner at Smith, Gambrell & Russell, previously said the intervenors in the case could decide to continue to defend the Biden-era rule.
