Report on the Transatlantic Divergence in Sustainability Policy and its Impact on Sustainable Development Goals (SDGs)

Introduction

A significant divergence in sustainability policy between the United States (U.S.) and the European Union (EU) has accelerated in 2025. While the EU continues to advance a comprehensive agenda aligned with the Sustainable Development Goals (SDGs), the U.S. has shifted towards broad deregulation, creating a complex landscape for global corporations. This report analyzes the growing divide across key areas, with a specific focus on the implications for achieving the SDGs, particularly those related to climate, energy, responsible production, and governance.

1. Divergence in Global Climate Commitments

U.S. Withdrawal from International Climate Frameworks and SDG 13

The U.S. administration’s 2025 decision to initiate withdrawal from the Paris Agreement marks a direct move away from international cooperation on climate change, undermining global efforts to achieve SDG 13 (Climate Action). This policy reflects a prioritization of domestic energy industries over international climate commitments.

EU’s Reaffirmation of SDG 13 and SDG 17

In contrast, the EU has reinforced its commitment to SDG 13 (Climate Action) through legally binding frameworks such as the European Climate Law and the European Green Deal. These initiatives mandate ambitious emissions reduction targets. Furthermore, the EU is actively strengthening SDG 17 (Partnerships for the Goals) by pursuing bilateral collaboration with other major emitters, such as China, to maintain global momentum on climate action and green transition processes.

2. Contrasting Regulatory Frameworks and Corporate Responsibility

U.S. Deregulation and its Impact on SDG 7 and SDG 12

The U.S. has pursued a policy of rapid deregulation, which has significant consequences for several SDGs. Key actions include:

• Suspension of the SEC’s climate disclosure rule, reducing corporate transparency and accountability relevant to SDG 12 (Responsible Consumption and Production).
• Defunding of clean energy incentives previously established under the Inflation Reduction Act, hindering progress towards SDG 7 (Affordable and Clean Energy).
• Rollback of EPA methane and emissions controls, directly impacting environmental protection goals.
• Restrictions on new renewable energy projects on federal lands, further impeding the transition required by SDG 7.

EU’s ESG Framework Aligned with SDG 12

The EU maintains a robust regulatory infrastructure designed to promote corporate sustainability, directly supporting SDG 12 (Responsible Consumption and Production). Core components include:

1. Corporate Sustainability Reporting Directive (CSRD): Mandates comprehensive ESG disclosures.
2. Corporate Sustainability Due Diligence Directive (CSDDD): Requires companies to manage environmental and human rights impacts in their supply chains.
3. EU Taxonomy: A classification system to guide investment towards environmentally sustainable activities.

Despite this strong framework, the EU has proposed simplifications, such as the Omnibus Simplification Package, to ease burdens on SMEs. While intended to make compliance more manageable, critics argue these changes risk diluting the EU’s progress towards its SDG-aligned objectives.

3. Divergence in Climate Finance and Investment

U.S. Market Signals and Setbacks for SDG 7 and SDG 9

Policy shifts in the U.S. have created market uncertainty, leading to a decline in investment for clean energy and a reduction in green bond issuance. This trend poses a direct challenge to financing the infrastructure and innovation needed to achieve SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation, and Infrastructure).

EU’s Stable Green Finance Ecosystem

The EU has cultivated a more stable policy environment for sustainable finance. The Sustainable Finance Disclosure Regulation (SFDR) and the EU Green Bond Standard provide clear market signals and combat greenwashing. Coordinated actions by the European Central Bank (ECB) and the European Investment Bank (EIB), including €15 billion in new green transition funding, continue to direct capital towards projects that support SDG 7, SDG 9, and SDG 13.

4. Governance, Legal Accountability, and SDG 16

Weakening Governance for Sustainability in the U.S.

The U.S. has scaled back ESG-related oversight across federal agencies and faced state-level pushback against ESG integration in investment practices. This rollback of accountability mechanisms represents a departure from the principles of SDG 16 (Peace, Justice, and Strong Institutions), which calls for effective, accountable, and transparent institutions at all levels. While California has enacted climate disclosure laws, their future is uncertain due to legal challenges.

Strengthening Legal Accountability in the EU

The EU continues to strengthen legal accountability for sustainability, reinforcing SDG 16. The CSDDD establishes civil liability for companies failing to conduct proper due diligence. Moreover, the July 2025 Advisory Opinion from the International Court of Justice (ICJ) affirmed that states have binding obligations under international law to mitigate climate change, providing a powerful legal tool that supports climate litigation and strengthens governance frameworks globally.

5. Cross-Border Business Strategy and Compliance

Navigating a Dual Regulatory Reality

Multinational corporations face significant compliance challenges due to this divergence. U.S.-based firms with substantial operations in the EU are subject to its stringent reporting mandates (CSRD), which are deeply aligned with the SDGs. This creates a dual compliance regime where companies must adhere to legally binding SDG-related standards abroad while operating in a deregulated environment at home.

Strategic Imperative for SDG Alignment

To manage legal and reputational risks, companies are increasingly required to implement cross-border compliance systems that meet the EU’s high standards. This necessitates aligning internal protocols with global expectations on ESG, which are fundamentally shaped by the SDG framework. Success in this complex environment depends on a company’s ability to integrate principles from SDG 12, SDG 13, and SDG 16 into its core business strategy, regardless of shifting domestic policies.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article highlights a significant divergence in sustainability policies between the United States and the European Union, touching upon several Sustainable Development Goals (SDGs). The primary focus is on climate action, but this connects to goals concerning energy, economic growth, industry, responsible production, justice, and international partnerships.

• SDG 7: Affordable and Clean Energy

  The article discusses policies related to clean and renewable energy. It mentions the U.S. defunding incentives for clean energy and restricting new solar and wind projects, while the EU continues to pursue a green transition, supported by initiatives like the European Green Deal and funding from the European Investment Bank (EIB).

• SDG 9: Industry, Innovation and Infrastructure

  This goal is relevant through the discussion of decarbonization, green technology, and infrastructure. The EU’s strategy involves upgrading industries to be more sustainable, while the U.S. has removed sustainability criteria from infrastructure funding, showing a clear divergence in industrial and innovation policy.

• SDG 12: Responsible Consumption and Production

  The core of this goal is addressed through the focus on corporate sustainability reporting and due diligence. The EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) mandate that companies adopt sustainable practices and report on them, directly aligning with encouraging responsible corporate behavior.

• SDG 13: Climate Action

  This is the most central SDG in the article. The entire piece revolves around the contrasting approaches to climate change, citing the U.S. withdrawal from the Paris Agreement versus the EU’s legally binding commitments to emissions reduction and climate neutrality under the European Climate Law.

• SDG 16: Peace, Justice and Strong Institutions

  The article emphasizes the role of legal and regulatory institutions. It details the development of “effective, accountable and transparent institutions” through the EU’s ESG regulatory framework, legal accountability measures, and the EU Ombudsman’s inquiry. It also covers the International Court of Justice’s (ICJ) advisory opinion on states’ climate obligations.

• SDG 17: Partnerships for the Goals

  This SDG is addressed through the discussion of international cooperation and policy coherence. The article highlights a lack of coherence between the U.S. and EU but also points to new partnerships, such as the joint statement on climate change between the EU and China. It also mentions multi-stakeholder partnerships, like the consortium of 323 organizations advocating for strong sustainability reporting standards.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the issues discussed, several specific SDG targets can be identified:

1. Target 7.2: Increase substantially the share of renewable energy in the global energy mix.

   The article directly addresses this by contrasting the U.S. administration’s actions—slowing renewable energy permitting and restricting solar and wind projects on federal lands—with the EU’s continued focus on a green transition.

2. Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable…and greater adoption of clean and environmentally sound technologies.

   The EU’s Fit for 55 package, European Green Deal, and the EIB’s €15 billion in new green transition funding are direct efforts to achieve this target. Conversely, the U.S. defunding of decarbonization incentives and removal of sustainability criteria from infrastructure funding represent a move away from this target.

3. Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

   This is a central theme. The EU’s CSRD, which mandates detailed ESG reporting, and California’s SB 253 and SB 261, which require climate disclosures, are explicit mechanisms for this target. The U.S. federal suspension of the SEC’s climate disclosure rule is a direct counter-policy.

4. Target 13.2: Integrate climate change measures into national policies, strategies and planning.

   The article is a case study of this target. The EU has integrated climate measures through binding laws like the European Climate Law. In contrast, the U.S. initiated withdrawal from the Paris Agreement and rolled back federal climate regulations, demonstrating a de-integration of climate measures from national policy.

5. Target 16.6: Develop effective, accountable and transparent institutions at all levels.

   This is reflected in the discussion of regulatory frameworks. The EU is strengthening its institutional mechanisms for ESG accountability (CSRD, CSDDD, EFRAG), while the U.S. is scaling back ESG-related oversight across federal agencies like the SEC and EPA. The EU Ombudsman’s inquiry into the Omnibus Simplification Package also highlights efforts to ensure institutional accountability.

6. Target 17.14: Enhance policy coherence for sustainable development.

   The entire article is an analysis of the lack of policy coherence between two major economic blocs, the U.S. and the EU. The “transatlantic divergence on sustainability policy” is the main subject, making this target highly relevant as it describes the problem being discussed.

7. Target 17.16: Enhance the global partnership for sustainable development…complemented by multi-stakeholder partnerships.

   The article provides examples of this target in action. The EU-China joint statement on climate change is a bilateral partnership between major economies. The “consortium of 323 organizations that includes investors, companies, banks and other financial institutions” issuing a joint statement against diluting EU regulations is a clear example of a multi-stakeholder partnership.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article mentions or implies several quantitative and qualitative indicators that can be used to measure progress:

• Emissions Reduction Targets:

  The EU’s legally mandated goal of a “55% emissions reduction by 2030 and climate neutrality by 2050” serves as a direct, measurable indicator for progress on climate action (SDG 13).

• Climate Finance Volume:

  The article provides specific figures that act as indicators, such as the “€15 billion in new green transition funding” approved by the European Investment Bank (EIB). The decline in “Green bond issuance” in the U.S. is another, albeit negative, indicator of financial commitment (SDG 13).

• Number and Scope of Regulations:

  The existence, suspension, or rollback of specific regulations serves as a key indicator. Examples include the EU’s CSRD, CSDDD, and CBAM versus the U.S. suspension of the SEC’s climate disclosure rule and the rollback of EPA methane controls. The number of states passing anti-ESG laws (“ten states had passed new anti-ESG laws”) is a quantifiable indicator of policy direction (SDG 16).

• Corporate Reporting and Disclosure:

  The requirement for companies to report on Scope 1, 2, and 3 emissions under California’s SB 253 is a specific indicator. The number of companies subject to and complying with the CSRD would be a direct measure of progress on Target 12.6.

• International Agreements and Partnerships:

  A country’s status regarding the Paris Agreement (ratified, withdrawn) is a clear indicator of its commitment to global climate action. The issuance of joint statements, such as the one between the EU and China, serves as a qualitative indicator of international cooperation (SDG 17).

• Legal Rulings and Lawsuits:

  The number and outcomes of climate accountability lawsuits against governments and corporations are indicators of legal and institutional progress. The article mentions the ICJ’s Advisory Opinion and lawsuits in the Netherlands, Belgium, and France as significant developments (SDG 16).

4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article. In this table, list the Sustainable Development Goals (SDGs), their corresponding targets, and the specific indicators identified in the article.

Source: natlawreview.com