Two senior Republican lawmakers who want to keep European Union ESG measures from gaining traction in the U.S. are asking the Biden administration for details on coordination efforts.

An “EU-style climate regulatory regime” would harm the U.S. energy, agriculture and financial sectors, Senator Tim Scott, ranking member of the Senate Banking Committee, and Representative James Comer, chairman of the House Committee on Oversight and Accountability wrote in letters sent June 5 to the heads of the Treasury Department and the Securities and Exchange Commission. 

At the heart of the issue are three EU environmental, social and governance rules, some still being hashed out, that would be among the world’s most expansive corporate disclosure regulations related to supply chains.

Read more: Climate Change Threatens a World Without Doritos

The lawmakers’ letters highlight a growing concern that EU rules to address a changing climate and global labor standards are fast outpacing U.S. regulators’ efforts to draft and finalize their own. The SEC’s proposed climate disclosure rule, for example, has yet to be finalized and is almost certain to be mired in litigation for months if not years before it could go into effect. That means the EU could emerge as the standard-setter.

“We are deeply concerned that U.S. agencies under the Biden administration are either passively allowing a foreign body to regulate American companies or are willfully circumventing the U.S. regulatory process by actively coordinating with foreign governments to dictate climate and economic policy to U.S. companies,” they wrote.

The Treasury Department and the SEC didn’t immediately respond to requests for comment. 

Legal Headaches

The lawmakers asked SEC Chair Gary Gensler and Treasury Secretary Janet Yellen for information on their cooperation with EU counterparts on corporate disclosure regulations. They asked for details on meetings since January 2021 related to the rules, including discussions with European regulators as well as with climate and sustainability advocacy organizations like Persefoni and Ceres. 

The Corporate Sustainability Due Diligence Directive has particularly caused heartburn for companies because it would open them up to what could be a tsunami of litigation for failing to clean up their supply chains. The rule would make companies accountable for environmental, human rights and other violations by their suppliers.

Read more: Applying Due Diligence for a Sustainable Supply Chain

Bankers based in Europe have been sounding alarms about the so-called CS3D. Many U.S. companies are waking up to the fact that they could also be swept into the regulatory regime if they generate a certain amount of revenue in the EU.

Financial-services firms fear the rule could place burdensome due-diligence requirements — not just on them but also on their suppliers and any subsidiary funds or companies they’re invested in. 

The EU parliament on June 1 pushed back against efforts to ease some of the legislation’s requirements on companies.