The Draft European Union (EU) Directive On Corporate Sustainability Due Diligence (Directive) covers all EU companies with 500+ employees and EUR 150 million+ in net turnover worldwide OR EU companies operating in high impact sectors (textiles, agriculture & food, mining), with more than 250 employees and a net turnover of EUR 40 million+ worldwide OR Non-EU companies reaching the mentioned thresholds by turnovers generated in the EU. Small and medium-sized enterprises are not directly within the scope of the Directive.
Due Diligence (DD) obligations concerning human rights and environment require companies to :
- Integrate DD into their policies
- Identify actual or potential adverse impacts
- Prevent and mitigate potential adverse impacts
- Bring actual adverse impactsto an end
- Establish and maintain a complaints procedure
- Monitor effectiveness of DD policy and measures
- Publicly communicate on DD
- DD obligations target the companies’ own operations or those of their subsidiaries, direct and indirect partners, and where related to their value chains, from their ‘established business relationships’.
- In addition to sanctions, reference is made to civil liability for damages arising due to the failure to comply with DD obligations. However, a potential escape clause is included for the activities of an indirect partner with whom the company was in an established business relationship, by way of contractually referring to verification of third parties.
- A new type of duty of care is regulated for company directors concerning sustainability, human rights, climate and environment related aspects of their decisions.
- Supervisory authorities will be established under domestic laws to check and monitor compliance with the Directive.
- European Network of Supervisory Authorities will be established by the Commission for cooperation between supervisory authorities and coordination of their practices.
The proposal will be presented to the European Parliament and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national law and communicate the relevant texts to the Commission.