Yellen Says US Is Concerned About EU’s ESG Supply Chain Rules

(Bloomberg) -- Treasury Secretary Janet Yellen said the US is concerned about the potential “negative, unintended consequences” of European Union efforts to force corporations to screen their supply chains for environmental and social risks.

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“We’re looking very carefully at the EU’s corporate sustainability directive and we’re concerned about the impact it could have on US firms,” Yellen told lawmakers Tuesday at a hearing of the House Financial Services Committee. “We’re consulting with the EU and making clear that we’re concerned about the directive’s extra-territorial scope.”

The Corporate Sustainability Due Diligence Directive has already made its way through the European Parliament and is headed for EU member states amid intense lobbying from several interest groups to water down its final wording. If adopted, the wide-ranging bill would force companies to identify and address human rights and environmental violations up and down their value chains.

“While we’re supportive of the high level aims of the CSDDD we are concerned that its has extra-territorial scope and potential for unintended negative consequences for US firms,” Yellen said. “This is something that we’re discussing with the EU and are making our concerns known.”

Lara Wolters, the EU lawmaker who spearheaded the passage of the CSDDD in the EU’s parliament, has said that efforts to hold companies legally liable are likely to face considerable pushback.

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