What changed between the draft committee report and the plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

10 unchanged paragraphs

on the proposal for a directive of the European Parliament and of the Council Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937

(COM(2022)0071 – C90050/2022 – 2022/0051(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0071),

– having regard to Article 294(2), Article 50(1) and (2)(g) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90050/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Economic and Social Committee of 14 July 2022,

– having regard to Rule 59 of its Rules of Procedure,

– having regard to the opinions of the Committee on Foreign Affairs, Committee on International Trade, Committee on Economic and Monetary Affairs, Committee on Employment and Social Affairs, Committee on the Environment, Public Health and Food Safety, Committee on Development, Committee on Industry, Research and Energy, Committee on the Internal Market and Consumer Protection,

Changed:– having regard to the report of the Committee on Legal Affairs (A90000/2022),(A9-0184/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

Removed:Recital 4: (4) The behaviour of companies across all sectors of the economy is key to success in the Union’s sustainability objectives as many Union companies rely on global value chains. It is also in the interest of companies to protect human rights and the environment, and uphold good governance, in particular given the rising concern of consumers and investors regarding these topics. Several initiatives fostering enterprises which support value-oriented transformation already exist on Union77, as well as national78 level.

Added:Recital 1: (1) The Union is founded on the respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights as enshrined in the EU Charter of Fundamental Rights and in Article 2 of the Treaty on the European Union. Those core values that have inspired the Union’s own creation, as well as the universality and indivisibility of human and environmental rights, and respect for the principles of the United Nations Charter and international law, should guide the Union’s action on the international scene. Such action includes fostering the sustainable economic, social and environmental development of developing countries.

Removed:Recital 6 a (new): (6 a) All companies have the responsibility to respect human rights, as enshrined in the international conventions listed in the Annex, Part I, Section 2, regardless of their size, sector, operational context, ownership and structure, and therefore under this Directive they should be required to conduct due diligence and should take appropriate measures to identify and address adverse human rights impacts along their value chain. The extent and nature of due diligence can vary according to the size, sector, operating context, and risk profile of the company.

Added:Recital 2: (2) A high level of protection and improvement of the quality of the environment and promoting European core values are among the priorities of the Union, as set out in the Commission’s Communication on A European Green Deal74 . These objectives require the involvement not only of the public authorities but also of private actors, in particular companies. Article 191 of the Treaty on the Functioning of the European Union (TFEU) states that Union policy on the environment shall contribute to preserving, protecting and improving the quality of the environment, protecting human health, prudent and rational utilisation of natural resources and promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

Removed:Recital 13: (13) The European Parliament, in its resolution of 10 March 2021 calls upon the Commission to propose Union rules for comprehensive corporate due diligence obligations, applicable to all large companies and SMEs listed in stock exchanges or operating in high-risk sectors, with consequences up to and including civil liability for those companies that cause or contribute to harm by failing to carry out due diligence100. The Council Conclusions on Human Rights and Decent Work in Global Supply Chains of 1 December 2020 called upon the Commission to table a proposal for a Union legal framework on sustainable corporate governance, including cross-sector corporate due diligence obligations along global supply chains101. The European Parliament also calls for clarifying directors` duties in its own initiative report adopted on 2 December 2020 on sustainable corporate governance. In their Joint Declaration on EU Legislative Priorities for 2022102, the European Parliament, the Council of the European Union and the Commission have committed, to deliver on an economy that works for people, and to improve the regulatory framework on sustainable corporate governance.

Added:Recital 3: (3) In its Communication on a Strong Social Europe for Just Transition75 , the Commission committed to upgrading Europe’s social market economy to achieve a just transition to sustainability, ensuring that no-one is left behind. This Directive will also contribute to the European Pillar of Social Rights, which promotes rights ensuring fair working conditions. It will also create greater visibility for, and ownership of, the Pillar among companies, whose involvement is essential for its effective implementation. It forms part of the EU policies and strategies relating to the promotion of fair and decent work worldwide, including in global value chains, as referred to in the Commission Communication on decent work worldwide76 .

Removed:Recital 14: (14) This Directive aims to ensure that companies active in the internal market contribute to sustainable development and the sustainability transition of economies and societies through the identification, prevention and mitigation, bringing to an end, remediation and minimisation of potential or actual adverse human rights and environmental impacts connected with companies’ own operations, subsidiaries and value chains.

Added:Recital 4: (4) The behaviour of companies across all sectors of the economy is key to success in the Union’s sustainability objectives as many Union companies rely on global value chains. It is also in the interest of companies to protect human rights and the environment, in particular given the rising concern of consumers and investors regarding these topics. Several initiatives fostering enterprises which support value-oriented transformation already exist on Union77, as well as national78 level, including binding legislation in several Member States such as France and Germany, which gives rise to the need for a level playing field for companies in order to avoid fragmentation and to provide legal certainty for businesses operating in the single market. It is moreover essential to establish a European framework for a responsible and sustainable approach to global value chains, given the importance of companies as a pillar in the construction of a sustainable society and economy.

Removed:Recital 15: (15) Companies should take appropriate steps to set up and carry out due diligence measures, with respect to their own operations, products and services, those of their subsidiaries, as well as their direct and indirect business relationships throughout their value chains in accordance with the provisions of this Directive. This Directive should not require companies to guarantee, in all circumstances, that adverse impacts will never occur or that they will be stopped. For example with respect to business relationships where the adverse impact results from State intervention, the company might not be in a position to arrive at such results. Therefore, the main obligations in this Directive should be ‘obligations of means’. The company should take the appropriate measures which can reasonably be expected to result in prevention or minimisation of the adverse impact under the circumstances of the specific case. Account should be taken of the specificities of the company’s value chain, sector or geographical area in which its value chain partners operate, the company’s power to influence its direct and indirect business relationships, and whether the company could increase its power of influence.

Added:Recital 5: (5) Well-established existing international standards on responsible business conduct such as the United Nations Guiding Principles on Business and Human Rights79 and the OECD Guidelines for Multinational Enterprises79a clarified in the OECD Due Diligence Guidance for Responsible Business Conduct79b specify that companies should protect human rights and set out how they should respect and address the protection of the environment across their operations and value chains. The United Nations Guiding Principles on Business and Human Rights recognise the responsibility of companies to exercise human rights due diligence by identifying, preventing and mitigating the adverse impacts of their operations on human rights and by accounting for how they address those impacts. Those Guiding Principles state that businesses should avoid infringing human rights and should address adverse human rights impacts that they have caused, contributed to or are linked with in their own operations, subsidiaries and through their direct and indirect business relationships. / 79a OECD Guidelines for Multinational Enterprises, 2011 updated edition, available at http://mneguidelines.oecd.org/guidelines/.https://mneguidelines.oecd.org/mneguidelines/ / 79b OECD Guidance on Responsible Business Conduct, 2018, and sector-specific guidance, available at https://www.oecd.org/investment/due-diligence-guidance-for-responsible-business-conduct.htm.

Removed:Recital 16: (16) The due diligence process set out in this Directive should cover the six steps defined by the OECD Due Diligence Guidance for Responsible Business Conduct, which include due diligence measures for companies to identify and address adverse human rights and environmental impacts. This encompasses the following steps: (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimising actual and potential adverse human rights, environmental and good governance impacts, (4) verifying, monitoring and assessing the effectiveness of measures, (5) communicating, (6) providing remediation.

Added:Recital 6: (6) The concept of human rights due diligence was specified and further developed in the OECD Guidelines for Multinational Enterprises which extended the application of due diligence to environmental and governance topics. The OECD Guidance on Responsible Business Conduct and sectoral guidance are internationally recognised frameworks setting out practical due diligence steps to help companies identify, prevent, mitigate and account for how they address actual and potential impacts in their operations, value chains and other business relationships. National Contact Points (NCPs) created by adherents to the OECD Guidelines for Multinational Enterprises play an important role in promoting due diligence by companies through their roles in promoting the Guidelines and acting as non-judicial grievance mechanisms. The concept of due diligence is also embedded in the recommendations of the International Labour Organisation (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.82 / (deleted) / (deleted)

Removed:Recital 17: (17) Adverse human rights, environmental and good governance impacts occur in companies’ own operations, subsidiaries, products, services, and in their value chains, in particular at the level of raw material sourcing, manufacturing, or at the level of product or waste disposal. In order for the due diligence to have a meaningful impact, it should cover human rights, environmental and good governance adverse impacts generated throughout the life-cycle of production and use and disposal of product or provision of services, at the level of own operations, subsidiaries and in value chains.

Added:Recital 6 a (new): (6a) All companies should respect human rights, as enshrined in the international conventions and instruments listed in the Annex, Part I, Section 2, and those under the scope of this Directive should be required to conduct due diligence and should take appropriate measures to identify and address adverse human rights impacts along their value chain. The extent and nature of due diligence can vary according to the size, sector, operating context, and risk profile of the company.

Removed:Recital 18: (18) The value chain should cover activities related to the production of a good or provision of services by a company, including the development of the product or the service and the use and disposal of the product as well as the related activities of business relationships of the company. It should encompass upstream direct and indirect business relationships that design, extract, manufacture, transport, store and supply raw material, products, parts of products, or provide services to the company that are necessary to carry out the company’s activities, and also downstream relationships, including direct and indirect business relationships, that use or receive products, parts of products or services from the company up to the end of life of the product, including inter alia the distribution of the product to retailers, the transport and storage of the product, dismantling of the product, its recycling, composting or landfilling.

Added:Recital 7: (7) The United Nations’ Sustainable Development Goals83 , adopted by all United Nations Member States in 2015, include the objectives to promote sustained, inclusive and sustainable economic growth. The Union has set itself the objective to deliver on the UN Sustainable Development Goals. The private sector contributes to those aims. In the current geopolitical situation arising from Russian aggression in Ukraine, the energy crisis, the continuing fallout from COVID-19 and attempts to maintain and strengthen the security of the agri-food chain, the private sector could help promote sustained, inclusive and sustainable economic growth, while avoiding the creation of imbalances on the internal market.

Removed:Recital 19: (19) As regards regulated financial undertakings providing loan, credit, or other financial services, clients that are households and natural persons not acting in a professional or business capacity should not be considered to be part of the value chain.

Added:Recital 8: (8) International agreements under the United Nations Framework Convention on Climate Change, to which the Union and the Member States are parties, such as the Paris Agreement84 and the recent Glasgow Climate Pact85 , set out precise avenues to address climate change and keep global warming within 1.5 C degrees. Besides specific actions being expected from all signatory Parties, the role of the private sector, in particular its investment strategies is also considered central to achieve these objectives. While just 100 companies have been the source of more than 70% of the world’s greenhouse gas emissions since 1988, there is a fundamental mismatch between corporate climate commitments and their actual investments to fight against climate change. This Directive is therefore an important legislative tool to avoid any misleading climate neutrality claims and to stop greenwashing and fossil fuels expansion worldwide in order to achieve international and European climate objectives, also recommended by the latest scientific reports85a. / 85a CDP Carbon Majors Report, 2017 Influence Map Report, Big Oil's Real Agenda on Climate Change 2022, September 2022, https://influencemap.org/report/Big-Oil-s-Agenda-on-Climate-Change-2022-19585 IEA, Net Zero by 2050, A Roadmap for the Global Energy Sector, p. 51.

Added:Recital 9: (9) In the European Climate Law86 , the Union also legally committed to becoming climate-neutral by 2050 and to reducing emissions by at least 55% by 2030. Both these commitments require changing the way in which companies produce and procure. The Commission’s 2030 Climate Target Plan87 models various degrees of emission reductions required from different economic sectors, though all need to see considerable reductions under all scenarios for the Union to meet its climate objectives. The Plan also underlines that “changes in corporate governance rules and practices, including on sustainable finance, will make company owners and managers prioritise sustainability objectives in their actions and strategies.” The General Union Environmental Action Programme to 2030 87a (‘8th EAP’), the framework for Union action in the field of the environment and climate, aims to accelerate the green transition to a climate-neutral, sustainable, non-toxic, resource-efficient, renewable energy-based, resilient and competitive circular economy in a just, equitable and inclusive way, and to protect, restore and improve the state of the environment by, inter alia, halting and reversing biodiversity loss. The 2019 Communication on the European Green Deal88 sets out that all Union actions and policies should pull together to help the Union achieve a successful and just transition towards a sustainable future in which no one is left behind. It also sets out that sustainability should be further embedd…

Added:Recital 11: (11) The Action Plan on a Circular Economy91 , the Biodiversity strategy92 , the Farm to Fork strategy93 and the Chemicals strategy94, the Pharmaceutical Strategy, the 2021 EU Action Plan Towards Zero Pollution for Air, Water and Soil and Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery95, Industry 5.096 and the European Pillar of Social Rights Action Plan97 and the 2021 Trade Policy Review98 list an initiative on sustainable corporate governance among their elements. Due diligence requirements under this Directive should therefore contribute to preserving and restoring biodiversity and by improving the state of the environment, in particular air, water and soil. They should also contribute towards accelerating the transition to a non-toxic circular economy. Due diligence requirements under this Directive should also contribute to the objectives of the Zero Pollution Action Plan of creating a toxic-free environment and protecting the health and well-being of people, animals and ecosystems from environment-related risks and negative impacts.

Added:Recital 12: (12) This Directive is in coherence with the EU Action Plan on Human Rights and Democracy 2020-202499. This Action Plan defines as a priority to strengthen the Union’s engagement to actively promote the global implementation of the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises as clarified in the OECD Due Diligence Guidance for Responsible Business Conduct as the relevant guidelines, including by advancing relevant due diligence standards.

Added:Recital 13: (13) The European Parliament, in its resolution of 10 March 2021 calls upon the Commission to propose Union rules for comprehensive corporate due diligence obligations, with consequences including civil liability for those companies that cause or contribute to harm by failing to carry out due diligence 100 . The Council Conclusions on Human Rights and Decent Work in Global Supply Chains of 1 December 2020 called upon the Commission to table a proposal for a Union legal framework on sustainable corporate governance, including cross-sector corporate due diligence obligations along global supply chains.101 The European Parliament also calls for clarifying directors` duties in its own initiative report adopted on 2 December 2020 on sustainable corporate governance. In their Joint Declaration on EU Legislative Priorities for 2022102 , the European Parliament, the Council of the European Union and the Commission have committed, to deliver on an economy that works for people, and to improve the regulatory framework on sustainable corporate governance.

Added:Recital 14: (14) This Directive aims to ensure that companies active in the internal market contribute to sustainable development and the sustainability transition of economies and societies by respecting human rights and the environment, through the identification, prevention and mitigation, bringing to an end remediation and minimisation, and where necessary, prioritisation, of potential or actual adverse human rights and environmental impacts connected with companies’ own operations, subsidiaries and value chains, and ensuring that those affected by a failure to respect this duty have access to justice and legal remedies. This Directive should be without prejudice to the responsibility of Member States to respect and the duty to protect human rights and the environment under international law.

Added:Recital 15: (15) Companies should take appropriate steps within their means to set up and carry out due diligence measures, with respect to their own operations, those of their subsidiaries, as well as their direct and indirect business relationships in their value chains in accordance with the provisions of this Directive. This Directive should not require companies to guarantee, in all circumstances, that adverse impacts will never occur or that they will be stopped. For example with respect to business relationships where the adverse impact results from State intervention, the company might not be in a position to arrive at such results. Therefore, the main obligations in this Directive should be ‘obligations of means’. The company should take the appropriate measures which can reasonably be expected to result in prevention or minimisation of the adverse impact under the circumstances of the specific case, proportionate and commensurate to the degree of severity and the likelihood of the adverse impact and the size, resources, and capacities of the company. Account should be taken of the specificities of the company’s value chain, sector or geographical area in which its value chain partners operate, the company’s power to influence its business relationships, and whether the company could increase its power of influence.

Added:Recital 16: (16) The due diligence process set out in this Directive should cover the six steps defined by the OECD Due Diligence Guidance for Responsible Business Conduct, which include due diligence measures for companies to identify and address adverse human rights and environmental impacts. This encompasses the following steps: (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimising actual and potential adverse human rights and environmental impacts, (4) verifying, monitoring and assessing the effectiveness of measures, (5) communicating, (6) providing remediation.

Added:Recital 17: (17) Adverse human rights, and environmental impacts occur in companies’ own operations, subsidiaries, products, services, and in their value chains, in particular at the level of raw material sourcing, manufacturing, or at the level of product or waste disposal. In order for the due diligence to have a meaningful impact, it should cover human rights, and environmental adverse impacts generated throughout the life-cycle of production and sale and waste management of product or provision of services, at the level of own operations, subsidiaries and in value chains.

Added:Recital 17 a (new): (17a) Global value chains in particular critical raw materials value chains, are impacted by detrimental effects of natural or man-made hazards. The risks in critical value chains have been made apparent by the COVID-19 crisis while the frequency and impact of those shocks are likely to increase in the future, constituting a driver for inflation and leading to a subsequent increase of macroeconomic volatility as well as market and trade uncertainty. To address this, the EU should initiate an annual Union-wide assessment of the resilience of companies to adverse scenarios related to their value chains, that would map, assess and provide potential responses to their value chain risks, including externalities as well as social, environmental and political risks.

Added:Recital 18: (18) The value chain should cover activities related to the production, distribution and sale of a good or provision of services by a company, including the development of the product or the service and waste management of the product as well as the related activities of business relationships of the company. It should encompass the activities of a company’s business relationships related to the design, extraction, manufacture, transport, storage and supply of raw material, products, parts of products, as well as the sale or distribution of goods or the provision or development of services, including waste management, transport and storage, excluding the waste management of the product by individual consumers.

Added:Recital 18 a (new): (18a) In some situations once products are sold or distributed by a business relationship, companies may have diminished ability to monitor impacts in order to take reasonable steps to prevent or mitigate them. In such situations, identifying actual and potential impacts and taking preventive or mitigating actions will be important prior to and at the point of initial sale or distribution, and in follow up or ongoing interactions with those business relationships when such impacts are reasonably foreseeable or when notified of significant impacts through the notification procedure.

Added:Recital 18 b (new): (18b) When a company sources products containing recycled material, it may be difficult to verify the origins of the secondary raw materials. In such situations the company should take appropriate measures to trace secondary raw materials to the relevant supplier and evaluate whether there is adequate information to demonstrate that the material is recycled.

Added:Recital 19: (19) As regards regulated financial undertakings providing financial services, linked to the conclusion of a contract within a value chain, the provision of such services should include the activities of the clients directly receiving them, and the subsidiaries thereof whose activities are linked to the contract in question. In order to avoid an overlap of due diligence exercises of regulated financial undertaking, activities of companies or other legal entities that are part of the value chain of that client are excluded from the scope of this Directive if due diligence obligations are set elsewhere under EU law. Clients that are households and natural persons not acting in a professional or business capacity, as well as small and medium sized undertakings, should not be considered to be part of the value chain of regulated financial undertakings.

Added:Recital 19 a (new): (19a) Regulated financial undertakings as well as other companies should use information beyond the information derived from credit rating agencies, sustainability rating agencies or benchmark administrators.

Recital 20: deleted

Change 2

Changed:Recital 21: (21) Under this Directive, EU companies with more than 250 employees on average and a worldwide net turnover exceeding EUR 40 million in the financial year preceding the last financial year shouldor becompanies requiredwhich toare complythe withultimate dueparent diligence.company Asof regardsa companiesgroup whichthat dohad not500 fulfilemployees thoseand criteria,a butnet whichworldwide hadturnover of more than 50150 employeesmillion onin averagethe andlast morefinancial thanyear EURfor 8which millionannual worldwidefinancial netstatements turnoverhave inbeen theprepared financialshould yearbe precedingrequired to comply with due diligence. The calculation of the lastthresholds financialshould yearinclude andthe whichnumber operateof inemployees oneand orturnover moreof high-impacta sectorscompany’s orbranches, which are publiclyplaces listedof onbusiness other than the stockhead exchange,office duethat diligenceare shouldlegally applydependent 2on yearsit, afterand thetherefore endconsidered as part of the transpositioncompany, periodin ofaccordance thiswith directive,EU inand ordernational tolegislation. provideTemporary foragency aworkers longerand adaptationother period.workers Temporaryin agencynon-standard workers,forms of employment, including those posted under Article 1(3), point (c), of Directive 96/71/EC, as amended by Directive (EU) 2018/957 of the European Parliament and of the Council103, and employees in third party undertakings with which the company has entered into a vertical agreement in return for the payment ofCouncil103 royalties,, should be included in the calculation of the number of employees in the user company. Posted workers under Article 1(3), points (a) and (b), of Directive 96/71/EC, as amended by Directive (EU) 2018/957,2018/957/EU, should only be included in the calculation of the number of employees of the sending company.

Change 3

Changed:Recital 22: (22) In order to reflect the priority areas of international action aimed at tackling human rights and environmental issues, the selection of high-impactCommission sectorsshould fordevelop thesector-specific purposesguidelines, ofincluding thisfor Directivethe shouldfollowing besectors, based on existing sectoral OECD due diligence guidance. The following sectors should be regarded as high-impact for the purposes of this Directive:guidance: the manufacture of textiles, wearing apparel, leather and related products (including footwear), and the wholesale trade and retail of textiles, clothing and footwear; agriculture, forestry, fisheries (including aquaculture), the manufacture of food products, marketing and advertising of food and beverages, and the wholesale trade of agricultural raw materials, live animals, animal products, wood, food, and beverages; energy, the extraction, transport and handling of mineral resources regardless of where they are extracted from (including crude petroleum, natural gas, coal, lignite, metals and metal ores, as well as all other, non-metallic minerals and quarry products), the manufacture of basic metal products, other non-metallic mineral products and fabricated metal products (except machinery and equipment), and the wholesale trade of mineral resources, basic and intermediate mineral products (including metals and metal ores, construction materials, fuels, chemicals and other intermediate products), construction and related activities, the provision of financial services,services,, suchinvestment asservices loans,and credits,activities financing,and pensions,other marketfinancial funding,…services; and the production, provision and distribution of information and com…

Change 4

Changed:Recital 23: (23) In order to achieve fully the objectives of this Directive addressing human rights, environmentalrights and good governanceenvironmental adverse impacts with respect to companies’ operations, products and services, and those of its subsidiaries and value chains, third-country companies with significant operations in the EU should also be covered. More specifically, the Directive should apply to third-country companies which generated a net turnover of at least EUR 40 million in the Union in the financial year preceding the last financial year or acompanies netwhich turnoverare ofthe moreultimate thanparent EURcompany 8of milliona butgroup lessthat thanhad EUR500 40employees millionand ina thenet financialworldwide yearturnover precedingof themore lastthan financial150 yearmillion inand oneat orleast more40 ofmillion thewas high-impactgenerated sectors,in asthe ofUnion 2in yearsthe afterlast thefinancial endyear offor thewhich transpositionannual periodfinancial ofstatements thishave Directive.been prepared. The calculation of net turnover should include royaltiesturnover receivedgenerated by themselvesthird orparty theircompanies Unionwith whom the company and/or its subsidiaries orhas Unionentered branchesinto througha vertical agreements concludedagreement in the Union.Union in return for royalties.

Change 5

Changed:Recital 25: (25) In order to achieve a meaningful contribution to the sustainability transition, due diligence under this Directive should be carried out with respect to adverse human rights impact on protected persons resulting from any action which removes or reduces the ability of an individual or group to enjoy the rights or to be protected by the prohibitions enshrined in the international conventions and instruments listed in the Annex to this Directive, and subsequent case law and the work of treaty bodies related to these conventions, which include trade union, workers’ and social rights. In order to ensure a comprehensive coverage of human rights, a negative impact on the enjoyment of a right not specifically listed in that Annex which directly impairs a legal interest protected in those conventions and instruments should also form part of the adverse human rights impact covered by this Directive, provided that the company concerned could have reasonably established the risk of such impairment and any appropriate measures to be taken in order to comply with the due diligence obligations under this Directive, taking into account all relevant circumstances of their operations, such as the sector and operational context. Due diligence should further encompass adverse environmental impacts on air, water, soil, biodiversity, animal welfare, climate mitigation and adaptation, the transition to a circular economy and impacts resulting from the violation of one of the prohibitions and obligations pursuantlisted toin the international environmental conventions listedAnnex into thethis Ann…Directive.

Change 6

Removed:Recital 27: (27) In order to conduct appropriate human rights, environmental and good governance due diligence with respect to their operations, their subsidiaries, and their value chains, companies covered by this Directive should integrate due diligence into corporate policies, identify, prevent, mitigate, remediate as well as bring to an end and mitigate the extent of potential and actual adverse human rights, environmental and good governance impacts, establish or participate in a complaints procedure, monitor and verify the effectiveness of the measures taken in accordance with the requirements that are set up in this Directive, communicate publicly on their due diligence and consult with affected stakeholders throughout this entire process. In order to ensure clarity for companies, in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end, or when this is not possible, minimising actual adverse impacts should be clearly distinguished in this Directive.

Added:Recital 25 a (new): (25a) This Directive should provide for specific measures in case of adverse systemic state-sponsored impacts resulting from actions, policies, regulations or institutionalised practices decided, implemented and enforced by, or carried out with the active support of States’ national or local authorities.

Removed:Recital 28: (28) In order to ensure that due diligence forms part of companies’ corporate policies, and in line with the relevant international framework, companies should integrate due diligence into all their corporate policies and levels of operation and have in place a due diligence policy, developed in consultation with stakeholders. The due diligence policy should contain a description of the company’s approach, including in the long term, to due diligence, a code of conduct describing the rules and principles to be followed by the company’s employees and subsidiaries across all corporate functions and operations; a description of the processes put in place to implement due diligence, including the measures taken to verify compliance with the code of conduct and to extend its application to business relationships, and adequate policies to avoid passing on the costs of the due diligence process to business partners in a weaker position. The code of conduct should apply in all relevant corporate functions and operations, including procurement and purchasing decisions. Companies should also update their due diligence policy annually.

Added:Recital 25 b (new): (25b) Companies should also be responsible for using their influence to contribute to an adequate standard of living in value chains. This is understood as a living wage for employees and a living income for self-employed workers and smallholders, which they earn from their work and production and must meet their needs and those of their family.

Removed:Recital 29: (29) To comply with due diligence obligations, companies need to take appropriate measures with respect to identification, prevention and bringing to an end adverse impacts. An ‘appropriate measure’ should mean a measure that is capable of achieving the objectives of due diligence proportionate to the degree of severity and the likelihood of the adverse impact , taking into account the circumstances of the specific case, including the nature of the adverse impact, characteristics of the economic sector, the nature of the company’s specific activities, products, services and specific business relationship. For the purposes of Articles 7 and 8, in cases where a company has caused or may have caused an impact, appropriate measures should be understood as measures which aim to prevent or mitigate an impact, and remediate any damage caused by an impact. For the purposes of Articles 7 and 8, in cases where a company has contributed to or may have contributed to an impact, appropriate measures should be understood as measures which aim to prevent or mitigate the contribution to the impact, using or increasing the company’s leverage with other responsible parties to prevent or mitigate the impact, and contributing to remediating any damage caused by an impact, to the extent of the contribution. For the purposes of Articles 7 and 8, in cases where a company’s operations, products or services are or may be directly linked to an impact through its relationships with other entities, appr…

Added:Recital 25 c (new): (25c) This Directive acknowledges the 'One Health' approach as recognised by the World Health Organization, an integrated and unifying approach that aims to sustainably balance and optimise the health of people, animals and ecosystems. The 'One Health' approach recognises that the health of humans, domestic and wild animals, plants, and the wider environment, including ecosystems, are closely interlinked and interdependent. It is therefore appropriate to lay down that environmental due diligence should encompass avoiding environmental degradation that results in adverse health effects such as epidemics, and to respect the right to a clean, healthy and sustainable environment. In respect to the G7 commitment to acknowledge the rapid rise in antimicrobial resistance (AMR) at the global scale, it is necessary to promote the prudent and responsible use of antibiotics in human and veterinary medicines.

Removed:Recital 30: (30) Under the due diligence obligations set out by this Directive, a company should identify and assess actual or potential adverse human rights, environmental and good governance impacts. In order to allow for a comprehensive identification and assessment of adverse impacts, such identification and assessment should be based on quantitative and qualitative information. For instance, as regards adverse environmental impacts, the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. Identification and assessment of adverse impacts should include assessing the human rights, environmental and good governance context in a dynamic way and in regular intervals: prior to a new activity or relationship, prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically, at least every 12 months, throughout the life of an activity or relationship. When identifying adverse impacts, companies should also identify and assess the impact of a business relationship’s business model and strategies, including trading, procurement and pricing practices. Where the company cannot prevent, bring to an end or mitigate all its adverse impacts at the same time, it should be able to prioritize its action, provided it takes the measures reasonably available to the company, taking into account the specific circumstances.

Added:Recital 25 d (new): (25d) Adverse human rights and environmental impacts can be intertwined or underpinned by factors such as corruption and bribery, hence their inclusion in the OECD Guidelines for Multinational Enterprises. It therefore may be necessary for companies to take into account these factors when carrying out human rights and environmental due diligence.