The Brussels effect

The EU often prides itself for leading by example on areas like environment, health and human rights, forcing other countries to follow its standards if they want access to its multibillion market — otherwise known as the “Brussels effect.”

For example, under the Corporate Sustainability Reporting Directive adopted in 2022, companies are required to publish information on the impact of their activities on the environment following a set of environmental, social and governance (ESG) criteria. 

“The majority of the EU sustainability laws apply to both non-EU and European companies,” said Emma Bichet, who leads the global law firm Cooley’s ESG practice in Europe, mostly representing big U.S. companies.

And the U.S. election won’t impact those obligations, she said.

For large U.S. firms, some of which have multiple European subsidiaries, it can also be easier to apply the rules at group level, creating a “spillover effect into global operations,” Bichet added. 

Some argue the EU has overestimated this influence, however. “For the moment, there is more criticism than willingness to follow,” said Santos from BusinessEurope.