CS3D Still Threatens American Businesses After EU Reforms 

For American companies, the European Union has raised the main coverage threshold under its Corporate Sustainability Due Diligence Directive (CS3D) from €450 million to €1.5 billion in annual EU revenue. The rollback comes after the EU acknowledged that the directive’s compliance demands undermine European competitiveness. The 2026 amendments cite Mario Draghi’s finding that the due diligence framework is “a major source of regulatory burden.” Lawmakers responded by narrowing obligations to the largest businesses, arguing that these firms have the resources and leverage to manage compliance. 

The American concern nevertheless persists. The European Commission is explicit: effects are not limited to Europe and can require U.S. factories with overseas suppliers to assess relevant human rights and environmental risks across those operations, gather information, and take preventive or corrective action. Even a small American parts supplier with no direct sales to Europe could find itself fielding compliance requests from a larger manufacturer. 

These changes are now law. The Omnibus I amendments took effect on March 18, 2026. Member states must implement CS3D by July 26, 2028, and company compliance begins on July 26, 2029. Under the original 2024 schedule, the largest companies would have faced obligations from July 2027. Successive amendments have effectively granted these firms a two-year reprieve. 

The EU has sharply narrowed CS3D’s scope. For EU companies, the thresholds increased from 1,000 to 5,000 employees and from €450 million to €1.5 billion in annual worldwide revenue. For American companies, the main threshold is €1.5 billion in EU revenue, with no employee requirement. Separate rules still apply to corporate groups and certain franchises. Brussels also scrapped the mandatory Paris-aligned climate transition plan and eliminated EU-wide civil liability rules, leaving liability to national law.  

The amended law gives companies more leeway to focus on the most likely and severe risks using reasonably available information. It also restricts information requests. Yet due diligence is not generally confined to direct suppliers. The reforms reduce the burden without limiting the directive to activities within Europe. 

The sanctions underscore the financial stakes. The original directive set national maximum fines at no less than 5% of worldwide net revenue; the amended law lowers this to 3%. That is a meaningful reduction, but the calculation still sweeps in revenue earned outside Europe. For a company with $100 billion in annual worldwide revenue, the ceiling is $3 billion. This applies to the most serious violations, not every infraction. 

Compliance also involves continuing work. The Commission lists complaints and notification procedures, monitoring and public communication alongside identifying and addressing risks. Companies need staff and systems to collect supplier information, assess it, document decisions, and respond when problems arise. The Commission itself acknowledges the costs of running due diligence processes and taking preventive or corrective action. Those resources have competing uses, including investment and hiring.  

That is why American business opposition extends beyond the number of companies covered. The U.S. Chamber of Commerce, Business Roundtable, National Association of Manufacturers and American Petroleum Institute warned Congress in December 2024 that CS3D encroaches on American regulatory authority. In its October 2025 analysis, the Chamber called for limiting the law to EU-based companies and activities within EU territory. Raising the revenue threshold does not deliver that territorial limitation.  

Congress has begun responding. On September 16, 2026, the House Energy and Commerce Committee advanced H.R. 9385, the PROTECT USA Act of 2026, by 25 votes to 20. The committee’s bill would generally prohibit covered U.S. entities from complying with foreign sustainability due diligence regulations and limit recognition of related foreign judgments. It includes exceptions for ordinary business activities and a hardship exemption process. Committee approval moves the proposal forward, but does not itself exempt American businesses from CS3D. 

The administration also has a diplomatic commitment to pursue this. In the August 2025 U.S.-EU trade framework, the EU agreed to undertake efforts to prevent CS3D and the separate Corporate Sustainability Reporting Directive from imposing undue restrictions on transatlantic trade. The EU also pledged to address U.S. concerns about requirements imposed on non-EU companies operating under comparable high-quality regulations. This creates a basis for further negotiations, without amounting to a blanket American exemption. 

Congress and the administration should use the time before compliance begins to secure real limits on CS3D’s reach into U.S. operations. Brussels has already admitted that excessive compliance burdens can undermine its own businesses. There is no reason American workers and companies should be forced to shoulder those burdens through a foreign regulatory regime simply for trading with Europe.