In May, European Union officials approved a radical bill that could severely damage the U.S. economy, violate individual rights, and force thousands of U.S. companies to adopt left-wing values. If this legislation were fully implemented in the United States, the country may never recover.
The Corporate Sustainability Due Diligence Directive aims to transform business practices globally by imposing environmental, social and governance requirements on large companies operating in the European Union. The law applies whether or not the companies are headquartered outside the EU.
Virtually every U.S. industry would be affected by the CSDDD, including important industries like the nation's large agricultural sector.
The CSDDD requires targeted companies to adopt a number of “due diligence” practices, many of which are consistent with left-wing ideological views.
But targeted companies won't just be required to change their own operations — they'll be forced to force many of their business partners to change their practices as well, regardless of where they're located.
Large companies covered by the CSDDD's requirements include European Union-based companies with more than 1,000 employees and worldwide net sales of more than $489 million. (Net sales is similar to revenue.)
Non-EU companies are covered by the law if they have net sales in the EU of $489 million or more, which includes US companies.
The law includes many requirements, including limits on land use, water consumption, and biodiversity loss. The CSDDD also requires companies to transition their operations to rely on “green energy,” no matter how economically devastating that transition may be, and requires companies to limit certain types of “disinformation.”
Trade unions are also given ample legal protection and a number of binding EU and UN conventions are imposed on private companies.
The CSDDD requires EU companies to adopt national policies that comply with these rules and other basic regulations set out in law, but EU countries are free to adopt stricter standards at national level.
Companies that do not or refuse to comply with the law face huge fines equal to 5 percent of the company's worldwide net sales. The CSDDD also allows individuals and activist groups to sue violators of the law for damages, opening the door to left-wing legal battles.
The law will be phased in over several years, starting in 2027, and many of America's largest companies will be required to comply with its provisions.
Influence on America
Based on publicly available financial reports, many iconic American brands are likely to be subject to the CSDDD, including Amazon, Apple, Google, Ford, Cargill, McDonald's, Meta, Microsoft, and Sysco Foods.
But this is just the tip of the iceberg: the Directive requires that covered large companies force many companies upstream and downstream in their “chain of activities” to comply with many of the CSDDD rules, regardless of how much business SMEs do in Europe.
For example, a fictitious U.S. steel manufacturer in Texas that sells to Ford would be required to adopt EU ESG rules because Ford's revenues in the European Union fall under the requirements of the CSDDD.
The same goes for warehouses and transportation companies that do business with Ford, as well as dozens of other companies in the Ford continuum of operations.
The CSDDD requires Ford and other covered large U.S. companies to use contractual agreements to enforce the law’s ESG obligations on their business partners.
No place to hide
Virtually every U.S. industry would be affected by the CSDDD, including important industries like the nation's large agricultural sector.
Consider, for example, the influence of Sysco Foods, the largest food distributor in the United States. subsidiarySysco, an international food group, operates in many territories outside the United States, including in EU countries such as France. In France, Sysco Revenue In 2023 $1.6 billionThis means the company will become subject to new EU ESG law.
Cisco is Thousands of SuppliersAll these companies will have to comply with EU ESG law in some form.
According to Sysco's 2023 Annual ReportThe company's supply network includes “larger companies selling brand name and private label products, as well as independent regional brand and private label converters and packers.”
“We also carry specialty and seasonal items from small and medium-sized producers to meet the growing demand for local products. Produce, meat, cheese and other local products can help you differentiate your offerings, meet demand for new products and support your local community.”
All these suppliers, including the local farmers mentioned in Sysco's report, will have to comply with new EU ESG laws.
Huge wealth transfer
Not only would Europe's new ESG law strain the U.S. economy by subjecting companies to countless regulations and forcing a transition to more expensive and less reliable energy sources like wind and solar, it would also mandate the largest wealth transfer in history.
Under the provisions of the CSDDD, covered companies must provide targeted and appropriate support to their small business business partners, including:
It provides or enables access to capacity building, training, upgrading of management systems, and provides targeted and appropriate financial support, such as direct loans, low-interest loans, guarantees of continued procurement and assistance in obtaining financing, where compliance with codes of conduct or corrective action plans jeopardizes the survival of SMEs.
In other words, the targeted US companies will be forced to transfer assets to smaller companies around the world, including China, and to adopt EU ESG rules as well. The real victims are US households, who will bear the higher costs that will be passed on to them.
The End of Sovereignty
The EU's new ESG law is nothing less than a direct attack on U.S. sovereignty. Americans have no interest or use in Europe's failed policies.
Unfortunately, the fundamental changes envisioned by the CSDDD's drafters outside the United States and the EU are inevitable unless American politicians resist them strongly and quickly.
You've heard it before: pictureLectures have consequences. However, provisions in the Corporate Sustainability Due Diligence Directive could have a bigger impact than ever in the 2024 elections. Let's hope that voters make the right choice in November.
