Transatlantic Tumult Triggering ESG Setbacks?

On 21 August 2025, the EU and the US issued a joint statement that they have agreed upon a Framework Agreement on Reciprocal, Fair, and Balanced Trade (Framework Agreement). This Framework Agreement contains various compromises between the EU and the US on both tariffs and non-tariff-related items. Although the Framework Agreement at this time had not been published, the Commission did publish the key terms of this agreement. 

The published key terms also contain agreements on the following EU ESG regulations:

• EU Deforestion Regulation (EUDR);
• Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD/CS3D);
• Carbon Adjustment Mechanism Regulation (CBAM). 

In light of the US's public criticism of the EU's ESG framework, the Commission's published key terms of the Framework Agreement indicate that the EU aims to take away the perceived concerns about ESG by the US.

We have outlined these ESG key terms below and briefly provided our first thoughts on these key terms. 

EUDR

The key terms state that: 

“(…) the European Union commits to work to address the concerns of US producers and exporters regarding the EU Deforestation Regulation, with a view to avoiding undue impact on US-EU trade.” 

It is uncertain what this statement concretely entails in practical terms. There are rumors that the applicability of the EUDR may be postponed for another year (i.e. 30 December 2026 instead of 30 December 2025). However, the Commission has not published a legislative proposal to amend the EUDR in that regard, nor do the published key teams indicate that the Commission will do so. 

CSRD/CSDDD

The Commission states that it will commit to undertaking efforts to ensure that the CSRD/CSDDD do not pose undue restrictions on transatlantic trade. 

Regarding the CSRD, the Commission does not provide any further clarification. This is different for the CSDDD. According to the published key terms, the Commission will be committed to reducing the administrative burden on businesses, including small- and medium-sized enterprises (SMEs), and to propose changes to the requirement for a harmonized civil liability regime for due diligence failures and to climate-transition-related obligations. The key terms state, in particular, that the EU is committed to addressing concerns regarding the imposition of the CSDDD on US-based undertakings. 

Unfortunately, the published key terms do not elaborate on how the Commission intends to address these (alleged) concerns. In that regard, we note that the Second Proposal of the Omnibus I Package (click here for more background) already entails material changes to the CSDDD’s scope and revision of the current harmonized civil liability regime. Of course, it must be observed that this proposal must still be adopted by the European Parliament, in accordance with their proposed amendments, and that this outcome, presumably, will be subject to further negotiations in so-called trilogue sessions with the European Council and Commission; after which any agreed compromise must formally be adopted by the EU Institutions. 

In light thereof, it could be argued that the Commission is already on track. Given the upcoming possible trilogue sessions, the EU-US Framework Agreement may provide the Commission and certain Member States (which, of course, determined the Commission’s negation mandated in the EU/US trade deal in the first place) with some ammunition for further reductions or revisions of the CSRD/CSDDD - particularly related to, among other things, the EU liability scheme.

CBAM 

Finally, the published key terms provide that, in addition to the recently agreed increase of the de minimis exception, the EU commits to working on providing additional flexibilities in the CBAM implementation.

ESG Setback?

Our general take of the published key terms is that they mainly state the EU's commitment to taking certain actions without stating what the actual legal consequences will be. Therefore, until there is any further guidance or actual new legislative proposals, it remains to be seen what the actual practical impact for companies (outside the EU) will be. 

Of course, the postponing of CBAM, the ongoing debates on the current proposed revisions of the CSRD/CSDDD, the rumors about postponing the applicability of the EUDR and withdrawing the proposed Green Claims Directive, could be indicators that the EU may be willing to scale down certain of its ESG obligations. Therefore, it cannot be ruled out that the EU may be inclined to relax certain ESG provisions overall to address the concerns of the US, which also may influence the outcome of the Second Proposal of the Omnibus I Package. 

That said, the EU and its Member States are also bound by (customary) international law (i.e. including international climate change law and environmental law) as well as human rights law. In light of the ICJ's Advisory Opinion of 23 July 2025 on the obligations of States in relation to climate change (click here to read our analysis), it could also be argued that the EU and its Member States may be treading themselves on thin ice if scaling down its ESG regulations would result in environmental harm and detrimental to the obligation laid down in the Paris Agreement to keep the global average temperature rise below 1,5°C.