US state attorneys general warn companies

Last week, a group of 16 U.S. State Attorneys General sent letters to the leaders of several companies, including Microsoft, Google and Meta, urging the companies not to comply with the EU’s new sustainability reporting and due diligence regulations, the CSRD and CSDDD, and warning that the laws would expose the companies to lawsuits and government enforcement actions in the U.S. Lucy Blake, Partner at Jenner & Block, comments that "Global companies are trapped between a rock and a hard place where their obligations in the EU and UK are in conflict with expectations and risks in the US." This issue will come into even sharper focus later this year as the EU Parliament continues to negotiate CSRD and CSDDD amendments, particularly those touching on which companies will fall within the laws' scope.

Blake further explains that "Meeting US obligations on DEI and ESG in particular may mean they fall foul of obligations in the EU and UK to promote diversity and mitigate environmental, social and governance-related impacts." This tension is particularly acute for government contractors, whose failure to comply with one set of obligations or the other risks hamstringing their ability to win contracts on either side of the pond.

“There is no one size fits all solution to this predicament,” Blake notes. Global companies will need to navigate a path between the different requirements on ESG, DEI and other areas of law where there is international divergence, balancing their individual legal, commercial, reputational and political risks. Following the recent Executive Orders, the Administration is actively searching for "egregious offenders" to be held civilly and criminally liable for unlawful DEI-related employment practices. Blake adds that exposure can be unpredictable and a trigger for more fulsome investigations. The Attorney General's letter indicates that state officials are eager to support initiatives they view as in line with the Administration’s priorities on these issues.