What changed between the draft committee report and the plenary report

Added:Recital 26: (26) Companies should have guidance at their disposal that illustrates how their activities may impact human rights and which corporate behaviour is prohibited in accordance with internationally recognised human rights. Such guidance is included for instance in The United Nations Guiding Principles Reporting Framework104 and the United Nations Guiding Principles Interpretative Guide105 and should be made easily accessible to companies. Therefore, using relevant international guidelines and standards as a reference, the Commission should be able to issue additional guidance that will serve as a practical tool for companies.

Added:Recital 27: (27) In order to conduct appropriate human rights and environmental 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, where necessary, prioritise, prevent, mitigate, remediate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts, establish or participate in a notification and non-judicial grievance mechanism, monitor and verify the effectiveness of their actions taken in accordance with the requirements that are set up in this Directive, communicate publicly on their due diligence, and engage 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 the extent of actual adverse impacts should be clearly distinguished in this Directive.

Added: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 their relevant corporate policies and at all levels of operation and have in place a due diligence policy with short-, medium- and long-term measures and targets. The due diligence policy should contain a description of the company’s approach to due diligence, a code of conduct defining the rules, principles and measures to be followed and implemented where relevant throughout the company and its subsidiaries across all corporate operations; a description of the processes put in place and appropriate measures taken to implement due diligence in line with Articles 7 and 8 in the value chain, including the relevant measures taken to incorporate due diligence into its own business model, employment and purchasing practices with entities with which the company has a business relationship and measures taken to monitor and verify due diligence activities, 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 pricing practices and purchasing decisions, for instance on trading and procurement. Companies should also update their due diligence policy when significant changes occur.

Added:Recital 28 a (new): (28a) Parent companies should be able to perform actions which can contribute to the due diligence of their subsidiaries, where the subsidiary provides all the relevant and necessary information to and cooperates with its parent company, abides by its parent company's due diligence policy, the parent accordingly adapts its due diligence policy to ensure that the obligations laid down in Article 5(1) are fulfilled with respect to the subsidiary, the subsidiary integrates due diligence into all its policies and risk management systems in accordance with Article 5, where necessary, the subsidiary continues to take appropriate measures in accordance with Articles 7 and 8, as well as continues to perform its obligations under Articles 8a, 8b and 8d, where the parent company performs specific actions on behalf of the subsidiary, both the parent company and subsidiary clearly and transparently communicate so towards relevant stakeholders and the public domain, and the subsidiary integrates climate in its policies and risk management systems in accordance with Article 15. In order to hold subsidiaries accountable, the liability provided for in Article 22 of this Directive should remain at entity level without prejudice to Members States’ legislation on joint and several liability.

Added:Recital 28 b (new): (28b) In conflict-affected and high-risk areas, companies run an increased risk to be involved in severe human rights’ abuses. In these areas, companies should therefore undertake heightened, conflict-sensitive due diligence, in order to address these heightened risks and to ensure that they do not facilitate, finance, exacerbate or otherwise negatively impact the conflict or contribute to violations of international human rights law or international humanitarian law in conflict-affected or high-risk areas. Heightened due diligence includes complementing the standard due diligence with a thorough conflict analysis, based on meaningful and conflict-sensitive stakeholder engagement and aimed at ensuring an understanding of the root causes, triggers and parties driving the conflict and the impact of the company’s business activities on the conflict. In situations of armed conflict and/or military occupation, companies should respect the obligations and standards identified in International Humanitarian Law (IHL) and International Criminal Law (ICL) standards. Companies should follow guidance provided by relevant international bodies, including the International Committee of the Red Cross and the UNDP.

Added:Recital 28 c (new): (28c) The way a company can be involved in an adverse impact varies. A company can cause an adverse impact where its activities on their own are sufficient to result in an adverse impact. A company can contribute to an adverse impact where its own activities, in combination with the activities of other entities, cause an impact, or that the activities of the company cause, facilitate or incentivise another entity to cause an adverse impact. The contribution must be substantial, meaning that it does not include minor or trivial contributions. Assessing the substantial nature of the contribution and understanding when the actions of the company may have caused, facilitated or incentivised another entity to cause an adverse impact can involve the consideration of multiple factors. Several factors can be taken into account, including the extent to which a company may encourage or motivate an adverse impact by another entity, i.e. the degree to which the activity increased the risk of the impact occurring, the extent to which a company could or should have known about the adverse impact or potential for adverse impact, i.e. the degree of foreseeability, and the degree to which any of the company's activities actually mitigated the adverse impact or decreased the risk of the impact occurring. The mere existence of a business relationship or activities which create the general conditions in which it is possible for adverse impacts to occur should not in itself constitute a relations…

Added: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 that they caused, contributed or are directly linked to. ‘Appropriate measures’ should mean measures that are capable of achieving the objectives of due diligence and effectively addressing the adverse impact identified pursuant to Article 6 in a manner proportionate and commensurate to the degree of severity and the likelihood of the adverse impact and proportionate and commensurate to the size, resources and capacities of the company, 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, the 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 damag…

Added: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 and environmental impacts. In order to allow for a comprehensive identification and assessment of adverse impacts, such identification and assessment should be based on meaningful stakeholder engagement and 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 and environmental context in a dynamic way and continuously, including 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. Regulated financial undertakings providing financial services should identify the adverse impacts at the inception of the contract and before subsequent financial operations, and if notified of possible risks via the procedures in Art.9, during the provision of the service. When identifying and assessing adverse impacts, companies should also identify and assess the impact of a business relationship’s business model and strategies, including purchasing practices.

Added:Recital 30 a (new): (30a) Where the company cannot prevent, bring to an end or mitigate all the identified and assessed adverse impacts simultaneously, it should be allowed to prioritise the order in which it takes appropriate measures based on the severity and likelihood of the adverse impact and taking into account risk factors, by developing, implementing and regularly reviewing a prioritisation strategy. In line with the relevant international framework, the severity of an adverse impact should be assessed based on the scale, scope and irremediable character of the adverse impact, taking into account the gravity of an adverse impact, including the number of individuals that are or will be affected, the extent to which the environment is or may be damaged or otherwise affected, its irreversibility and the limits on the ability to restore affected individuals or the environment to a situation equivalent to their situation prior to the impact. Once the most severe and adverse impacts are addressed, the company should address less severe and less likely adverse impacts.

Added:Recital 30 b (new): (30b) Companies should prioritise impacts on the basis of severity and likelihood. The degree of leverage a company has over a business relationship is not relevant to its prioritisation decisions or processes. However, the degree of leverage can influence the appropriate measures that a company chooses to adopt in order to effectively mitigate and/or prevent impacts associated with business partners.

Recital 31: deleted

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Changed:Recital 32: (32) In line with international standards, prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. In order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts, this Directive should ensure that disengagement is a last-resort action, in line with the Union`s policy of zero-tolerance on child labour.labour, the Union’s strategy on rights of the Child and the target date of 2025 proclaimed by the United Nations for the full elimination of child labour worldwide. Terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. In the same line, women in precarious labour conditions could face more severe adverse human rights impacts thus increasing their vulnerability. This should therefore be taken into account when deciding on the appropriate action to take, and disengagement should be avoided where the impact of disengagement would be greater than the adverse impact the company is seeking to prevent or mitigate. In situations of state-imposed forced labour, where the adverse impact is organised by political authorities, unhindered engagement with those adversely impacted and mitigation are not possible. This Directive should ensure that companies terminate a business relationship where s…

Change 8

Changed:Recital 34: (34) So as to comply with the prevention and mitigation obligation under this Directive, companies should be required to take the following actions and appropriate measures, where relevant to the circumstances.relevant. Where necessary due to the complexity of prevention measures, companies should develop and implement a prevention action plan. Companies should establishconsider establishing through contractual provisions agreed with a partner with whom they have a business relationship that it will participate in carrying out due diligence as outlined in this Directive, including by ensuringensure itcompliance respectswith the company’s code of conduct and, as necessary, a prevention action plan. Partners with whom the company has a business relationship shouldcould be asked to seek corresponding contractual provisions from its partners to the extent that their activities are part of the companies’ value chain.

Change 9

Removed:Second half of recital 34 moved to new recital 34a

Added:Recital 34 a (new): (34a) The contractual provisions should not be such as to result in the transfer of responsibility for carrying out due diligence in accordance with this Directive and the liability for failing to do so. Moreover, the contractual provisions should be fair, reasonable and non-discriminatory under the circumstances, and should reflect the joint tasks of parties to conduct due diligence in ongoing cooperation. Companies should also assess whether the business partner can reasonably be expected to comply with those provisions. Often contractual terms are unilaterally imposed on a supplier by a buyer, and any breach thereof is likely to result in unilateral action by the buyer, such as termination or disengagement. Such unilateral action is not appropriate in the context of due diligence and would probably itself result in adverse impacts. In cases where the breach of such contractual provisions gives rise to a potential adverse impact, the company should first take appropriate measures to prevent or adequately mitigate such impacts, rather than considering ending or suspending the contract, in accordance with applicable law. To ensure comprehensive prevention of actual and potential adverse impacts, companies should also make investments which aim to prevent adverse impacts, provide targeted and proportionate financial and administrative support for an SME with which they have a business relationship such as financing, for example, through direct financing, low-interest loans, gu…

Removed:Recital 34 a (new): (34a) The simple inclusion of certain contractual provisions in company contracts should not be considered sufficient to satisfy that company’s legal obligations to carry out due diligence under this Directive. Moreover, contractual provisions should be fair and reasonable under the circumstances, and should reflect the joint responsibility of parties to conduct due diligence in ongoing cooperation. Often contractual terms are unilaterally imposed on a supplier by a buyer, and any breach thereof is likely to result in unilateral action by the buyer, such as termination or disengagement. Such unilateral action is not appropriate in the context of due diligence and would probably itself result in adverse impacts. To ensure comprehensive prevention of actual and potential adverse impacts, companies should also make investments which aim to prevent adverse impacts, provide targeted and proportionate support for an SME with which they have a business relationship such as financing, for example, through direct financing, low-interest loans, guarantees of continued sourcing, and assistance in securing financing, to help implement the code of conduct or prevention action plan, or technical guidance such as in the form of training, management systems upgrading, and collaborate with other companies.

Recital 35: deleted

Change 10

Changed:Recital 36: (36) In order to ensure that prevention and mitigation of potential adverse impacts is effective, companies should prioritizeprioritise engagement with business relationships in the value chain, instead of terminating the business relationship, as a last resort action after attempting at preventing and mitigating adverse potential impacts without success. However, the Directive should also, for cases where potential adverse impacts that a company caused or contributed to and that could not be addressed by the described prevention or mitigation measures, and there is no realisticreasonable prospect of change, refer to the obligation for companies to refrain from entering into new or extending existing relations with the partner in question and, where the law governing their relations so entitles them to, as a last resort, in line with responsible disengagement, to either temporarily suspend commercial relationships with the partner in question, while pursuing prevention and mitigation efforts; or to terminate the business relationship with respect to the activities concerned on account of the severity of the potential adverse impact.impact, or if the conditions for temporary suspension are not met. In order to allow companies to fulfil that obligation, Member States should provide for the availability of an option to terminate or suspend the business relationship in contracts governed by their laws. In deciding to terminate or suspend a business relationship, the company should assess the adverse impacts of that decision, in line with the due diligence obligations provided for in this Directive. It is possible that prevention of adverse impacts atwhether the level of indir…adver…

Change 11

Changed:Recital 37: (37) As regards direct and indirect business relationships, industry cooperation, industryIndustry schemes and multi-stakeholder initiatives can help create additional leverage to identify, mitigate, and prevent adverse impacts. Therefore it should be possible for companies to useparticipate in such initiatives to support the implementationaspects of their due diligencediligence, obligationsincluding laidto downcoordinate injoint thisleverage, Directiveachieve efficiencies, scale up best practices, and seek expertise relevant to thespecific extentsectors, thatgeographies, suchcommodities schemesor risk issues. The meaning of initiatives is broad and includes initiatives arethat appropriatesupport, tomonitor, supportevaluate, thecertify fulfilmentand/or verify aspects of thosea obligations.company’s Companiesdue coulddiligence, assess,or atthe theirdue owndiligence initiative,conducted theby alignmentits subsidiaries and/or business relationships. Such initiatives may be developed and overseen by governments, industry associations, groupings of theseinterested schemesorganisations, social partners or civil society organisations, and include monitoring organisations, global framework agreements, sector dialogues and initiatives withthat thecertify obligationsaspects underof thisdue Directive.diligence. In order to ensure full information on such initiatives, the Directive should also refer to the possibility for the Commission and the Member States to facilitate the dissemination of information on such schemes or initiatives and their outcomes. The Commission, in collaboration with Member States, may issue guidance for assessing the scope, alignment and credibility of industry schemes and multi-stakeholder initiatives. The scope, alignmentOECD and credibility of an industry scheme or multi-stakeholderrelevant initiativestakeholders, should be assessed by taking into account, in particular,issue theguidance inclusionfor ofassessing the perspectives ofprecise civilscope, societyalignment inwith thethis process.Directive, Theand usecredibility of relevant and credible industry schemes and multi-stakeholder initiatives to support companies’ due diligence should not absolve such companies of their individual responsibility to perform due diligence,initiatives. andCompanies shoul…part…

Change 12

Changed:Recital 38: (38) Under the due diligence obligations set out by this Directive, if a company identifies actual human rights, environmental orrights goodand governanceenvironmental adverse impacts, it should take appropriate measures to bring those to an end. It can be expected that a company is able to bring to an end actual adverse impacts in their own operations and in subsidiaries. However, it should be clarified that where adverse impacts cannot be brought to an end, companies should mitigate the extent of such impacts, whilst pursuing efforts to bring the adverse impact to an end, and implementing a corrective action plan, developed in consultation with affected stakeholders. Minimisation of the extent of adverse impacts should require an outcome that is the closest possible to bringing the adverse impact to an end. To provide companies with legal clarity and certainty, this Directive should define which actions companies should be required to take for bringing actual human rights and environmental adverse impacts to an end and minimisation of their extent, where relevant depending on the circumstances.

Change 13

Changed:Recital 39: (39) So as to comply with the obligation of bringing to an end and mitigating the extent of actual adverse impacts under this Directive, companies should be required to take the following actions, where relevant to the circumstances.relevant. They should neutralise the adverse impact or adequately mitigate its extent by restoring the affected stakeholderspersons, groups and communities and/or the environment back to the same position as before the adverse impacta hadsituation occurred,equivalent or as close as is possible into their situation prior to the circumstances.adverse impact. Where necessary due to the fact that the adverse impact cannot be immediately brought to an end, companies should develop and implement a corrective action plan with reasonable and clearly defined timelines for the implementation of appropriate measures and action and qualitative and quantitative indicators for measuring improvement. Companies shouldcould also establish through contractual provisions with a business partner with whom they have a business relationship that they will participate in carrying out due diligence, and ensure theycompliance respectwith the company’s code of conduct and, as necessary, a preventioncorrective action plan. BusinessPartners partnerswith shouldwhom the company has a business relationship could be encouragedasked to seekestablish corresponding reasonable, non-discriminatory and fair contractual provisions fromwith their partners, to the extent that their activities are part of the company’s value chain. The contractual provisions should be accompanied by the appropriate measures to support carrying out due diligence as outlined in this Directive. The simple inclusion of certainMoreover, contractual provisions in company contracts should not be considered sufficientfair, toreasonable satisfyand t…non-discrimin…

Recital 40: deleted

Change 14

Changed:Recital 41: (41) In order to ensure that bringing actual adverse impacts to an end or minimising them is effective, companies should prioritizeprioritise engagement with business relationships in the value chain, instead of terminating the business relationship, as a last resort action after attempting at bringing actual adverse impacts to an end or minimising them without success. However, this Directive should also, for cases where actual adverse impacts that a company caused or contributed to could not be brought to an end or adequately mitigated by the described measure, and there is no realisticreasonable prospect of change, refer to the obligation for companies to refrain from entering into new or extending existing relations with the partner in question and, where the law governing their relations so entitles them to, as a last resort, in line with responsible disengagement, to either temporarily suspend commercial relationships with the partner in question, while pursuing efforts to bring to an end or mitigate the extent of the adverse impact, or terminate the business relationship with respect to the activities concerned, on account of the severity of the actual adverse impact .or if the conditions for temporary suspension are not met. In order to allow companies to fulfil that obligation, Member States should provide for the availability of an option to terminate or suspend the business relationship in contracts governed by their laws. In deciding to terminate or suspend a business relationship, the company should assess the adverse impacts of that decision, in line with the due diligence obligations outlined in this Directive.sho…

Change 15

Changed:Recital 41 a (new): (41 a)(41a) Where a company has caused or contributed to an actual adverse impact, the company should take appropriate measures to remedyremediate that impact. The type and form of remedialRemedial actionsmeasures should be sufficientaim to appropriately remedyrestore the impact,affected persons and couldgroups foror instancecommunities takeand/or the form of financial compensation, orenvironment non-financialto formsa ofsituation remedyequivalent suchor as restitution, rehabilitation, public apologies, reinstatementclose andas contributionpossible to investigations, including antheir appropriatesituation combinationprior ofto thosethe measuresimpact, and other measures. Whilst companies should be obliged todeveloped taketaking remedialinto actions,account the factneeds ofand havingviews doneexpressed soby shouldaffected notstakeholders. precludeThey affectedmay stakeholdersinclude, frombut pursuingare furthernot actionlimited includingto, throughcompensation, complaintsrestitution, andrehabilitation, civilpublic procedures,apologies, andreinstatement thereor shouldcooperation notin begood anyfaith requirementwith forinvestigations. affectedIn stakeholderscertain tosituations, seekfinancial remediationcompensation priormay tobe makinga complaintsnecessary orway filingto claimsprovide insuch court.restoration. Where a company is directly linked to an adverse impact, it should be allowed to voluntarily participate in any remedial measures, where appropriate, and consider using its leverage with responsible parties to enable the remediation of any damage caused by an impact. Member States should ensure that stakeholders affected by an adverse impact should not be required to seek remediation prior to filing claims in court.

Change 16

Changed:Recital 42: (42) Companies should establishprovide ora participatepublicly inavailable and effective notification and non-judicial grievance mechanisms at operational level, that can be used by persons and organisations to easilynotify submitthem complaintsof directlyor toraise themgrievances and request remediation in case of legitimate concerns regarding actual or potential human rights, environmental andadverse goodimpacts governancein adversethe impacts.value Organisationschain. Persons and organisations who could submit such complaintsgrievances should include persons who are affected or have reasonable grounds to believe that they might be affected and their legitimate representatives, trade unions and other workers’ representatives representing individuals working in the value chain concerned and credible and experienced organisations the purpose of which includes the protection of the environment. Notifications may be submitted by the aforementioned persons and organisations as well as civil society organisations active in the areas related to the value chain concerned where they have knowledge about a potential or actual adverse impact, and legal and natural persons defending human rights and the environment. Companies should establish a procedure for dealing with those complaintsnotifications and grievances and inform workers, trade unions and other workers’ representatives, where relevant, about such processes. Companies should provide the possibility of submitting complaints through collaborative agreements with other companies or organisations, by participating in multi-stakeholder grievance mechanisms or joining a global framework agreement. Recourse to the complaintsnotifications and remediation mechanism should not prevent the complainant from having recourse to judicial remedies, nor should the former be agrievances prerequisitethrough beforecollaborative seekingarrangements judicial, remedies.including Inindustry accordanceinitiatives, with international standards, complainants should be entitled to receive from the company appropriate follow-up on the complaint and to meet withother thecompanies company’sor representa…organisations,…

Change 17

Changed:Recital 43: (43) Companies should monitor andcontinuously verify the implementation and monitor the adequacy and effectiveness of their due diligenceactions measures,taken in consultationaccordance with affectedthis stakeholders.Directive. They should carry out periodic assessments of their own operations, products and services, those of their subsidiaries and those of their business relationships, to monitor the effectiveness of the identification, prevention, minimisation, bringing to an end, mitigation and remediation of human rights , environmental and good governanceenvironmental adverse impacts. Such assessments should verify that adverse impacts are properly identified, due diligence measures are implemented and adverse impacts have actually been prevented or brought to an end. In order to ensure that such assessments are up-to-date, they should be carried out atcontinuously leastand everyafter 12a monthssignificant change occurs, and be revised in-betweencontinuously if there are reasonable grounds to believe that significant new risks of adverse impact could have arisen. Companies should retain documentation demonstrating their compliance with this requirement for 510 years.

Change 18

Changed:Recital 44: (44) Like in the existing international standards set by the United Nations Guiding Principles on Business and Human Rights and the OECD framework, it forms part of the due diligence requirement to communicate externally relevant information on due diligence policies, processes and activities conducted to identify and address actual or potential adverse impacts, including the findings and outcomes of those activities. Directive 2013/34/EU as regards corporate sustainability reporting sets out relevant reporting obligations for the companies covered by this directive.directive as well as Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector, for financial undertakings. In order to avoid duplicating reporting obligations, this Directive should therefore not introduce any new reporting obligations in addition to those under Directive 2013/34/EU for the companies covered by that Directive as well as the reporting standards that should be developed under it.it, nor should it introduce any new reporting obligations in addition to those under Regulation (EU) 2019/2088. As regards companies that are within the scope of this Directive, but do not fall under Directive 2013/34/EU, in order to comply with their obligation of communicating as part of the due diligence under this Directive, they should publish on their website an annual statement that meetsis consistent with those requirements in a language customary inat theleast sphereone of international business, and audited in line with the requirementsofficial outlinedlanguages inof Directivethe 2006/43/EC.Union.

Change 19

Removed:Recital 44 a (new): (44a) Companies should consult affected stakeholders by carrying out good faith, effective, meaningful and informed engagement with them throughout the due diligence process. Consultation should be ongoing and proactive, providing timely and culturally sensitive information to affected stakeholders. Affected stakeholders should have the right to request additional written information, and, where such a request is refused, companies should issue a written justification for such refusal. The consultation of affected stakeholders should take due account of barriers to participation and specific needs of vulnerable stakeholders, and ensure that stakeholders are free from retaliation and retribution, including by maintaining confidentiality and anonymity. Workers representatives should be informed by their company about its due diligence strategy and its implementation, in accordance with existing EU law.

Added:Recital 44 a (new): (44a) Requirements on companies which are under the scope of this Directive and at the same time are subject to reporting requirements under Articles 19a, 29a and 40a of Directive 2013/34/EU and therefore should report on their due diligence process as stipulated in Articles 19a, 29a and 40a of Directive 2013/34/EU should be understood as a requirement for companies to describe how they implement due diligence as provided for in this Directive. When fulfilling the requirements of Directive 2013/34/EU to report on actions taken to identify potential or actual adverse impacts, companies should explain whether they prioritised the order in which they took appropriate measures, how that approach was applied, and why it was necessary to prioritise. When fulfilling the requirements of Directive 2013/34/EU to report on any actions taken by the undertaking to prevent, mitigate, remediate or bring an end to actual or potential adverse impacts, and the result of such actions, the company should also disclose the number of instances where it decided to disengage, the reason for this disengagement and the location of the concerned business relationships without disclosing their identity.

Removed:Recital 45: (45) In order to give companies tools to help them comply with their due diligence requirements through their value chain, the Commission should provide guidance on model contractual clauses. Such guidance should emphasise the shared-responsibility dimensions of due diligence and clarify that, for due diligence to be effective in identifying, preventing, mitigating, accounting for, and, if needed, remedying adverse impacts, each party is required to, in ongoing cooperation with its counterpart, avoid causing, contributing, or being directly linked to potential and actual adverse impacts. The guidance should clarify that contracts should not be used to transfer responsibility for carrying out due diligence to others, unless such a transfer itself satisfies the due diligence standards of this Directive. The guidance should further clarify that the simple inclusion of contractual assurances cannot, on its own, satisfy the due diligence standards of this Directive. Such standards should only be satisfied if due diligence obligations are assigned to others in a diligent manner that ensures the effective performance of those obligations and includes measures appropriate to the circumstances, such as monitoring, financial and non-financial assistance, and responsible purchasing practices.

Added:Recital 44 b (new): (44b) It is not the objective of this Directive to require companies to publicly disclose intellectual capital, intellectual property, know-how or the results of innovation that would qualify as trade secrets as defined in Directive (EU) 2016/943 of the European Parliament and of the Council. Reporting requirements provided for in this Directive should therefore be without prejudice to Directive (EU) 2016/943. This Directive should also apply without prejudice to Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.

Removed:Recital 46: (46) In order to provide support and practical tools to companies or to Member State authorities on how companies should fulfil their due diligence obligations, the Commission, using relevant international guidelines and standards as a reference, and in consultation with Member States, representative SME organisations, business organisations and stakeholders, the European Union Agency for Fundamental Rights, the European Environment Agency, the European Labour Authority, and where appropriate with international bodies having expertise in due diligence, should have the possibility to issue guidelines, including for specific sectors or specific adverse impacts, such as situations of conflict or occupation. The Commission should, moreover, support safe participatory collection of independent data on human rights violations and environmental damage.

Added:Recital 44 c (new): (44c) Companies should take appropriate measures to carry out meaningful engagement with affected stakeholders allowing for genuine interaction and dialogue in their due diligence process. Engagement should cover information and consultation of affected stakeholders and should be comprehensive, structural, effective, timely and culturally and gender responsive. There are situations in which it will not be possible to carry out meaningful engagement with affected stakeholders, or where engagement with additional expert perspectives is useful to allow the company to comply fully with the requirements of this Directive, in particular in the context of scoping and prioritisation decisions. . In these cases companies should engage in meaningful engagement with other relevant stakeholders, such as civil society organisations or legal or natural persons defending human rights or the environment in order to gain credible insights into potential or actual adverse impacts. Consultation should be ongoing and companies should provide comprehensive, targeted and relevant information to affected stakeholders. Affected stakeholders should have the right to request additional written information, which should be provided by the company within a reasonable amount of time and in an appropriate and comprehensive format. Where such a request is refused, affected stakeholders should have the right to a written justification for such refusal. The information and consultation of affected stakeholde…

Removed:Recital 47: (47) In order to mitigate financial or administrative burden on SMEs, many of which are already struggling in the context of the global economic and sanitary crisis, Member States should set up and operate, either individually or jointly, dedicated user-friendly websites, portals or platforms, and Member States could also financially support SMEs and help them build capacity. Member States should also ensure that training on how to perform due diligence is made available for companies, especially SMEs. Such support should also be made accessible, and where necessary adapted and extended to upstream economic operators in third countries. Companies whose business partner is an SME, are also encouraged to support them to comply with due diligence measures, in case such requirements would jeopardize the viability of the SME and use fair, reasonable, non-discriminatory and proportionate requirements vis-a-vis the SMEs.

Added:Recital 44 d (new): (44d) Strategic lawsuits against public participation are a particular form of harassment brought against natural or legal persons to prevent or penalise speaking up on issues of public interest. Member States should provide necessary safeguards to address those manifestly unfounded claims or abusive court proceedings against public participation in accordance with national and EU legislation.

Removed:Recital 50: (50) In order to ensure that this Directive effectively contributes to combating climate change, companies should adopt and effectively implement a plan, in consultation with stakeholders, to ensure that the business model and strategy of the company are aligned with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement, the objective of achieving climate neutrality by 2050 and the 2030 climate target established in Regulation (EU) 2021/1119, and pursuant to the latest recommendations of the Intergovernmental Panel on Climate Change (IPCC) and the European Scientific Advisory Board on Climate Change established by that Regulation, taking into account their entire value chain.

Added:Recital 45: (45) In order to give companies tools to help them comply with their due diligence requirements through their value chain, the Commission, in consultation with Member States and relevant stakeholders, should provide guidance on model contractual clauses, which can be used voluntarily by companies as a tool to help fulfil their obligations in Articles 7 and 8. Such contractual clauses should stipulate, as a minimum, a clear allocation of tasks between contracting parties in ongoing cooperation, that they can not result in the transfer of responsibility for carrying out due diligence, and that, when such clauses are breached, companies should avoid terminating such clauses by first taking appropriate measures in line with Articles 7 and 8 of this Directive. The guidance should further clarify that the simple inclusion of contractual assurances cannot, on its own, satisfy the due diligence standards of this Directive. Such standards should only be satisfied if due diligence obligations are assigned to others in a diligent manner that ensures the effective performance of those obligations and includes measures appropriate to the circumstances, such as monitoring, financial and non-financial assistance, and responsible purchasing practices.

Removed:Recital 51: (51) With a view to increasing the financial incentives of directors, a significant portion of directors’ variable remuneration should be linked to the achievement of sustainability and in particular greenhouse gas emission reduction targets.

Added:Recital 46: (46) In order to provide support and practical tools to companies or to Member State authorities on how companies should fulfil their due diligence obligations, the Commission, using relevant international guidelines and standards as a reference, and in consultation with Member States, the European cross-industry and sectoral social partners and other relevant stakeholders, including civil society organisations, the European Union Agency for Fundamental Rights, the European Environment Agency, the European Labour Authority, the European External Action Service, the European Innovation Council and the Small and Medium-Sized Enterprises Executive Agency (EISMEA), the European Food Safety Authority, and where appropriate the OECD and other international bodies having expertise in due diligence, should issue clear and easily understandable guidelines, including general and sector specific guidance, in order to facilitate compliance in a practical manner.

Removed:Recital 53: (53) In order to ensure the monitoring of the correct implementation of companies’ due diligence obligations and ensure the proper enforcement of this Directive, Member States should designate one or more national supervisory authorities. These supervisory authorities should be of a public nature, independent from the companies falling within the scope of this Directive or other market interests, and free of conflicts of interest. In accordance with national law, Member States should ensure appropriate financing of the competent authority. They should be entitled to carry out investigations, including on-the-spot checks and interviews of relevant stakeholders, in particular trade unions and workers’ representatives, on their own initiative or based on complaints or substantiated concerns raised under this Directive. Where competent authorities under sectoral legislation exist, Member States could identify those as responsible for the application of this Directive in their areas of competence. They could designate authorities for the supervision of regulated financial undertaking also as supervisory authorities for the purposes of this Directive.

Added:Recital 46 a (new): (46a) In order to support companies fulfilling their due diligence obligations along their value chain, the European Commission should conduct further research on digital tools and promote them.

Removed:Recital 56: (56) In order to ensure effective compensation of victims of adverse impacts, Member States should be required to lay down rules governing the civil liability of companies for damages arising due to its failure to comply with the due diligence process. The company should be liable for damages if they failed to comply with the obligations to prevent and mitigate potential adverse impacts or to bring actual impacts to an end and mitigate their extent, or provide remediation, and as a result of this failure the company caused or contributed to an adverse impact that should have been identified, prevented, mitigated, remediated, brought to an end or its extent minimised through the appropriate measures, and led to damage.

Added:Recital 47: (47) Although SMEs are not included in the scope of this Directive, they could be impacted by its provisions as contractors or subcontractors to the companies which are in the scope. The aim is nevertheless to mitigate financial or administrative burden on SMEs, many of which are already struggling in the context of the global economic and sanitary crisis. In order to support SMEs, Member States, with the support of the Commission, should set up and operate, either individually or jointly, dedicated user-friendly websites, portals or platforms, and Member States should also financially support SMEs and help them build capacity. Such support should also be made accessible, and where necessary adapted and extended to upstream economic operators in third countries. Companies whose business partner is an SME, are also encouraged to support them to comply with due diligence measures and use fair, reasonable, non-discriminatory and proportionate requirements vis-a-vis the SMEs. SMEs should also have the possibility to apply this Directive on a voluntary basis and should for that purpose be supported through adequate measures and tools, and be incentivised.

Removed:Recital 57: (57) Where a company can demonstrate that it complied with its obligations under this Directive, it should not be liable for damage resulting from the impact, unless it was unreasonable, in the circumstances of the case, to expect that the action actually taken, including as regards verifying compliance, would be an appropriate measure to prevent, mitigate, bring to an end or mitigate the extent of the adverse impact. In the assessment of the existence and extent of liability, due account should be taken of the company’s efforts, insofar as they relate directly to the damage in question, to take remedial action, including that required of them by a supervisory authority, any investments made and any targeted support provided as well as any collaboration with affected stakeholders and other entities to address adverse impacts in its value chains.

Added:Recital 48: (48) In order to complement Member State support to companies in their implementation, including SMEs, the Commission should build on existing EU tools, projects and other actions helping with the due diligence implementation in the EU and in third countries. It should set up new support measures that provide help to companies, including SMEs on due diligence requirements, including an observatory for value chain transparency and the facilitation of joint stakeholder initiatives.

Removed:Recital 58: (58) Considering that victims and claimants will often lack the necessary access to evidence, where a claim is brought against a company and a claimant provides elements substantiating the likelihood of a company’s liability under this Directive, the company will be responsible for producing evidence to prove it complied with the Directive.

Added:Recital 49: (49) The Commission and Member States should continue to work in partnership with third countries to support upstream economic operators build the capacity to effectively prevent and mitigate adverse human rights and environmental impacts of their operations and business relationships, paying specific attention to the challenges faced by smallholders. They should use their neighbourhood, development and international cooperation instruments, including Free Trade Agreements, to support third country governments and upstream economic operators in third countries addressing adverse human rights and environmental impacts of their operations and upstream business relationships. This could include working with partner country governments, the local private sector and stakeholders on addressing the root causes of adverse human rights and environmental impacts.

Removed:Recital 59: (59) As regards civil liability rules, the civil liability of a company for damages arising due to its failure to carry out adequate due diligence should be without prejudice to civil liability of its subsidiaries or the respective civil liability of direct and indirect business partners in the value chain. Also, the civil liability rules under this Directive should be without prejudice to Union or national rules on civil liability, including rules on joint and several liability, related to adverse human rights impacts or to adverse environmental impacts that provide for liability in situations not covered by or providing for stricter liability than this Directive.

Added:Recital 50: (50) In order to ensure that this Directive effectively contributes to combating climate change, companies should in consultation with stakeholders adopt and implement a transition plan in line with the reporting requirements in Article 19a of Directive (EU) 2022/2464 (CSRD) to ensure that the business model and strategy of the company are aligned with the objectives of the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement, as well as the objective of achieving climate neutrality by 2050 as established in Regulation (EU) 2021/1119 (European Climate Law), and the 2030 climate target. The plan should take into account the value chain and include time-bound targets related to their climate objectives for scope 1, 2 and, where relevant, 3 emissions, including, where appropriate, absolute emission reduction targets for greenhouse gas including, where relevant, methane emissions, for 2030 and in five-year steps up to 2050 based on conclusive scientific evidence, except where a company can demonstrate that its operations and value chain do not cause greenhouse gas emissions and that such emission reduction targets would therefore not be appropriate. The plans should develop implementing actions to achieve the company’s climate targets and be based on conclusive scientific evidence, meaning evidence with independent scientific validation that is consistent with the limiting of global warming to 1.5°C as defined by t…

Removed:Recital 63: (63) In all Member States’ national laws, directors owe a duty of care to the company. In order to ensure that this general duty is understood and applied in a manner which is coherent and consistent with the due diligence obligations and the plans to combat climate change introduced by this Directive and that directors systematically integrate sustainability matters in their decisions, this Directive should clarify, in a harmonised manner, the general duty of care of directors to act in the best interest of the company, by laying down that directors integrate in their decision-making and assess the sustainability matters as referred to in Directive 2013/34/EU, including, where applicable, human rights, good governance, climate change and environmental consequences, including in the short, medium and long term horizons. Such clarification does not require changing existing national corporate structures.

Added:Recital 51: (51) Transition plans should include clear obligations for directors and board members to ensure that environmental and climate risks and impacts are addressed in the company’s strategy. With a view to increasing the financial incentives of directors, companies with more than 1000 employees on average should have a relevant and effective policy in place to ensure that a part of the directors’ variable remuneration is linked to the achievement of the targets of the company’s transition plan for combating climate change.

Removed:Recital 64: (64) Responsibility for due diligence and plans to combat climate change should be assigned to the company’s directors, in line with the international due diligence frameworks. Directors should therefore be responsible for putting in place and overseeing the due diligence actions and plans to combat climate change as laid down in this Directive and for adopting the company’s due diligence policy and plan to combat climate change, taking into account the input of stakeholders and civil society organisations and integrating due diligence into corporate management systems. Directors should also adapt the corporate strategy to actual and potential impacts identified and any due diligence measures taken.

Added:Recital 53: (53) In order to ensure the monitoring of the correct implementation of companies’ due diligence obligations and ensure the proper enforcement of this Directive, Member States should designate one or more national supervisory authorities. These supervisory authorities should be of a public nature, independent from the companies falling within the scope of this Directive or other market interests, and free of conflicts of interest. In accordance with national law, Member States should ensure appropriate financing of the competent authority. They should be entitled to carry out investigations, including, where appropriate, on-site inspections and hearing of relevant stakeholders, on their own initiative or based on grievances or substantiated concerns raised under this Directive. Where competent authorities under sectoral legislation exist, Member States could identify those as responsible for the application of this Directive in their areas of competence. They could designate authorities for the supervision of regulated financial undertaking also as supervisory authorities for the purposes of this Directive. Member States, when designating supervisory authorities and defining the procedures by which they operate, should ensure coordination and complementarity with other processes available under other international instruments, such as the non-judicial grievance mechanism operated by National Contact Points.

Removed:Article 1 – title: Subject matter and aim

Added:Recital 54: (54) In order to ensure effective enforcement of national measures implementing this Directive, Member States should provide for dissuasive, proportionate and effective sanctions for infringements of those measures. In order for such sanction regime to be effective, administrative sanctions to be imposed by the national supervisory authorities should include pecuniary sanctions, a public statement indicating that the company is responsible and the nature of the infringement, obligations to perform an action including ceasing the conduct constituting the infringement and desisting from any repetition of that conduct, and suspension of products from free circulation or export. Where the legal system of a Member State does not provide for administrative sanctions as foreseen in this Directive, the rules on administrative sanctions should be applied in such a way that the sanction is initiated by the competent supervisory authority and imposed by the judicial authority. Therefore, it is necessary that those Member States ensure that the application of the rules and sanctions has an equivalent effect to the administrative sanctions imposed by the competent supervisory authorities.

Removed:Article 1 – paragraph 1 – subparagraph 1 – point a: (a) on obligations for companies regarding actual and potential adverse impacts on human rights, the environment and good governance, with respect to their own operations, products and services and those of their subsidiaries, and the value chain operations carried out by entities with whom the company has a business relationship and

Added:Recital 54 a (new): (54a) In order to prevent an artificial reduction of potential administrative fines resulting from an ultimate parent company shifting its net worldwide turnover to third entities, Member States should ensure that, with regards to companies referred to in Articles 2(1)(b) and 2(2)(b), administrative pecuniary sanctions are calculated taking into account the consolidated turnover reported by that company.

Removed:Article 1 – paragraph 1 – subparagraph 1 a (new): The rules provided for under this Directive are aimed at ensuring that companies fulfil their duty to respect human rights, the environment and good governance and that those affected by a failure to respect this duty have access to justice.

Added:Recital 54 b (new): (54b) Under Article 18(2) of Directive 2014/24/EU, Article 36(2) of Directive 2014/25/EU and Article 30(3) of Directive 2014/23/EU, Member States are required to take appropriate measures to ensure compliance with obligations under Union law with regards to procurement and concession contracts. Therefore the Commission should assess whether it is relevant to review these directives to further specify the requirements and measures Member States are to adopt to ensure compliance with the sustainability and due diligence obligations under this Directive throughout procurement and concession processes, from selection to performance of the contract.

Added:Recital 56: (56) In order to ensure effective compensation of victims of adverse impacts, Member States should be required to lay down rules governing the civil liability of companies for damages arising due to its failure to comply with the due diligence process. The company should be liable for damages if they failed to comply with the obligations to prevent and mitigate potential adverse impacts or to bring actual impacts to an end and mitigate them , or provide remediation, and as a result of this failure the company caused or contributed to an adverse impact that should have been identified, prioritised, prevented, mitigated,, brought to an end, remediated or its extent minimised through the appropriate measures, and led to damage. Member States should also make sure that , in case there is no legal successor, the mother companies can be held liable for their subsidiary where the subsidiary is under the scope of this Directive or was at the time of the impact and has been dissolved by the parent company or has dissolved itself intentionally in order to avoid liability, irrespective of any cooperation with the parent company in conducting due diligence.