As the EU enters 2026, uncertainty looms on one of its flagship policies: the European Green Deal.
Adopted in 2019 to tackle climate change, it was designed to make Europe climate neutral by 2050. During Commission President Von Der Leyen’s first term the Green Deal became the EU’s strategy for economic growth, an ambitious plan that gave up traditional assumptions on doing business to make room for environmental and social justice concerns.
Von der Leyen’s second term (2024-2029) should have been the time to implement such strategy, instead it is witnessing its demise.
A key pillar of the Green Deal, for its impact on the industry, was the Corporate Sustainability Due Diligence Directive (CS3D). Adopted in May 2024 and scheduled to enter into force in 2026, the CS3D was meant to make businesses identify, prevent, and mitigate environmental and human rights liabilities in their global supply chains.
The goal was to use due diligence requirements to spread EU environmental and labor rules to the entire global economy, leveraging access to the European Single Market against compliance with European standards.
On December 8th, the European Parliament and the Council, an assembly of the 27 Member States, decided to reduce obligations and penalties, as well as to exclude more than 90% of the companies operating on EU soil from the regulation.
Happiness in DC
The US extensively lobbied against the CS3D. It was explicitly mentioned in the Framework Agreement on Trade signed on August 21 by Trump and Von der Leyen that marked a truce in the tariff war.
Back then, the EU signaled its commitment to address US concerns on the regulation, but what was formally an intention sounded more as a political conditionality for the suspension of the tariffs.
US Administrations never liked EU commitment to sustainability but pressure increased with Trump in power.
According to the Netherlands-based Centre for Research on Multinational Corporations, nine of the biggest US oil, gas, and other polluters joined efforts in Brussels to secure abolishment of environmental protection. With the help of the US Chamber of Commerce in Brussels, those businesses coordinated operations between both sides of the Atlantic to influence EU decision makers.
In Europe they found good friends in both French and German industries which since late 2024 convinced their governments of the need to scrap due diligence requirements.
Christmas letters
Different estimates place the administrative cost for a large company such ExxonMobil or Chevron to comply with CS3D from EUR 190,000 to EUR 640,000. Nonetheless, it is difficult to put a price tag on the potential business opportunities lost because of European environmental and human rights standards.
US Ambassador to the EU Puzder published a letter to EU decision makers in the Financial Times of December 2. US businesses received a money-saving decision by the EU on December 8th, tearing apart most of the requirements and penalties under the CS3D and excluding, as mentioned above, more than 90% of the initial recipients of the obligations.
The letter was not keen on the EU as an economic power. Ambassador Puzder stated that “the evidence of the EU’s economic decline” urged the EU political leaders to “begin to revive Europe’s entrepreneurial spirit by deregulating and accessing abundant reliable energy, allowing its businesses and citizens to thrive.” He called the CS3D “growth-killing” and stated “that Europe has become economically uncompetitive.”
A U-turn with no end in sight
The words Ambassador Puzder used are indeed rooted in a common narrative diffused in Europe at least since Mario Draghi published his report on EU competitiveness in September 2024.
Moreover, without France and Germany’s willingness to water down the CS3D, no single US effort would have been enough to pursue such an U-turn in less than two years from the regulation’s adoption. It is as much EU’s doing as it is the US’. Yet, the CS3D’s impact on transatlantic relations is far from ended.
Among the few companies still subject to the CS3D are some US big corporations, at least, looking at December’s political agreement, those with more than 5,000 employees and more than EUR 1.5 billion in annual revenues (according to Wikipedia in 2024 ExxonMobil had more than 60,000 employees and a revenue EUR 349 billion, eg). Therefore it is unlikely that the Trump Administration will say itself fully satisfied of the exemptions introduced so far.
Even though right now the priorities align, it will come the moment where the US demands will blatantly offset the EU’s willingness to give up its rules.
As the CS3D is a conditionality for future transatlantic trade relations in the US-EU Framework Agreement, increasing tension could lead to a death spiral of tariffs which could only be stopped by further watering down EU sustainability rules. Although such system could work in the short term, it is hardly bearable on the long run, under penalty of losing the credibility of the EU legislation, which could not become as Hogwarts’s magic stairs, always moving.
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