The European Union’s groundbreaking legislation to direct business to deliver sustainability and rights is under attack from within and without its borders.

Last week’s joint statement on a US-EU trade deal which confirms that US tariffs on EU goods will rise vertiginously to 15%, also reveals that Europe seems ready to concede to US pressures on vital Green Deal laws. While technical details of the deal remain opaque, the statement mentions an EU commitment to “undertake efforts to ensure that the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) do not pose undue restrictions on transatlantic trade”. This includes “efforts to reduce administrative burden… and to propose changes to… harmonised civil liability… and to climate-transition-related obligations.”

The EU also promises to “work to address US concerns” around “the imposition of CSDDD requirements on companies of non-EU countries” and the EU Deforestation Regulation, according to the ‘key terms’ communicated last Thursday.

The US Administration has regularly signalled its hostility to any regulation that curbs the primacy of shareholders’ quarterly returns (like climate action, or workers’ rights). ExxonMobil’s CEO has described the EU laws as “some of the worst legislation I've seen passed anywhere” – perhaps a badge of honour to those who realise we must act to reverse climate breakdown.

To complement this US deregulatory pressure, Europe’s regressive business associations and politicians are seeking to use the ‘Omnibus Simplification Package’ to eviscerate the smart regulation contained in Europe’s approved supply chain and reporting laws, the CSDDD and CSRD. The Omnibus already proposes legislative downscaling in many of the areas cited above.

The ‘Deal’ has been interpreted by many as a capitulation by Europe. The promises it seems to include regarding the gutting of Europe’s sustainability due diligence legislation move the EU further towards selling out its strategic autonomy, sovereignty and self-respect as the world’s largest trading bloc.

But for every action, there is a reaction. Responsible investors, companies, bankers, politicians and activists are encouraging a forward-looking approach. In May, the European Central Bank (ECB) spoke out against a weakening of the CSRD and CSDDD and has reiterated its stance in a letter by President Christine Lagarde to the European Parliament. The ECB highlights that “such a framework can help to prevent investment decisions being taken on the basis of incomplete information, thus ensuring that such decisions adequately take into account sustainability-related risks. The absence of sustainability information, on the other hand, could give rise to systemic risks that threaten financial stability.”

As of August, almost 200 companies and investors urge the EU not to weaken sustainability rules. In June, business, political and faith leaders called on the EU to uphold social and environmental “principles that are now more crucial than ever for the Union’s cohesion and the strengthening of its global influence”. In May, 90 economics professors pressed for “a swift and ambitious implementation of the CSDDD... as a crucial and effective step towards an economy that respects human rights, the environment and the climate”.

Around the world, many of Europe’s major trading partners are moving to increase their action on sustainability and inequality to rebuild public trust in markets that deliver more for the common good.

In Asia, Japan’s human rights due diligence Guidelines have been readily adopted by companies, with two thirds implementing a human rights policy and many requiring suppliers to also be compliant. In South Korea, the National Assembly is considering a new corporate human rights and environmental due diligence bill for both Korean and international companies. In Indonesia, a Presidential Regulation, expected to be finalised in 2026, will require companies to adhere to human rights principles and values when conducting business operations. In Thailand, a draft mandatory human rights and environmental due diligence law is being developed which will require companies operating in Thailand to identify, prevent and address human rights and environmental risks within their operations and supply chains.

And on other continents this story is repeated: in the Americas, the Colombian, Mexican and Canadian parliaments are considering new corporate due diligence laws; in Africa, both Kenya and South Africa are drafting new laws along similar lines. In the UK, the parliament’s Joint Committee on Human Rights calls for new legislation including a forced labour import ban, mandatory due diligence duties for businesses, and a civil liability cause of action.

Even in the US, enforcement of key business and human rights legislation – like Section 307 of the Tariff Act and the Uyghur Forced Labor Prevention Act (UFLPA) – continues and expands. The government has added more commodities as high-priority sectors for UFLPA enforcement and the US Customs and Border Protection (CBP) launched a “Forced Labor Allegation Portal” in June. Last week’s joint US-EU trade deal statement cites a commitment to work together on protecting internationally recognised labour rights, including “the elimination of forced labour in supply chains.”

In this global context, the Omnibus negotiations resume in the European Parliament in September: a period of momentous decisions for Europe’s future leadership in sustainability and economic justice. The member states, Parliament and Commission will soon together decide the shape of the Omnibus package. They have three options.

First; throw all agreed legislation under a bus, and turn their backs on making markets work for sustainability and the common good. Second; reduce the sustainability directives to a paper exercise with the same result as the first, deregulation under the disguise of simplification. Or third; deliver true simplification and harmonisation (which numerous experts have pointed out can best be achieved without reopening primary legislation), while holding fast to the principles that will deliver the Green Deal and sustain Europe’s vital leadership in environmental and social responsibility.

Will leaders capitulate further with a false competitiveness narrative that has completely gone off track? Or will they hold to and help lead the path towards sustainability and public trust that they were on, joined by many of the largest of the world’s emerging markets?

Heidi Hautala, former Member and Vice-President of the European Parliament

Phil Bloomer, Executive Director of the Business and Human Rights Resource Centre