A senior Republican politician has indicated that the new administration of Donald Trump could vehemently oppose the imposition of EU sustainability reporting rules on US companies trading in Europe.

The news comes just a day after Trump was inaugurated as the 47th US president and in the wake of a slew of executive orders, which included US withdrawal from the Paris Climate Agreement.

Politico, a high-profile political website in the US, reports House of Representatives member and attorney Andy Barr saying the EU legislation—the CSRD, or Corporate Sustainability Reporting Directive — is an “example of a foreign regulation that puts America last”.

‘Ferocious opposition’

Barr, a member of the congressional financial services committee, told Politico: “An American first agenda will animate ferocious opposition to a European Union that attempts to impose their costly, burdensome regulations on American firms.”

Barr was widely reported as visiting Trump’s Mar-a-Largo base with other Republicans in early January to plan for the administration’s policy agenda.

Speculation also emerged elsewhere this week that CSRD may become a bargaining chip in EU and US trade negotiations. In a blog by London-based lawyers Paul Davies and Betty Huber, from the US law firm Latham & Watkins, warn companies to keep a close watch on policy developments.

“This is especially the case if the US seeks to counter the extraterritorial impact of ESG and sustainability regulations (particularly from the EU) through trade negotiations, legislation or other mechanisms.”

One observer of US governance told Board Agenda: “I would not be surprised if the US wished for an exemption in exchange for trade. The US has a transactional US-first president.”

This is not the first time US business has placed sustainability legislation in its sights. December saw the US Chamber of Commerce write a letter to Congress complaining about CSRD and its sister directive, the Corporate Sustainability Due Diligence Directive (CSDDD).

The chamber said the directive’s “extra-territorial reach” was “not justified from a legal or market standpoint”.

The letter says: “Rather than pursuing policies that would improve their domestic economic climate, the EU is imposing undue regulatory measures that have a direct impact on the competitiveness of American firms.

Exemption call

“The US has traditionally provided exemptions under its own reporting rules for European companies, and the US government should at a minimum firmly advocate for reciprocal treatment.”

CSRD represents an effort by the EU to have companies report not only on their ESG risks but, under the double materiality principle, their impact on society and the environment.

The first set of reports are due this year.

Donald Trump’s election sounded the death knell for new US mandatory climate risk reporting rules. Though finalised by watchdogs at the Securities and Exchange Commission, the new rules were suspended last year after they faced a legal challenge in the courts.

That said, many studies show the number of US companies involved in environmental or ESG reporting has actually grown. A study by Reuters, published in October, revealed the number of large-cap companies sharing environmental data had grown to 85%, up from 54% in 2019.

The pushback comes at a time when the European Union is having its own internal debate about sustainability reporting.

It has emerged that German chancellor Olaf Scholz has lobbied EU president Ursula von der Leyen to delay introduction of the CSRD.