Article 4 — Amendments to Directive (EU) 2024/1760

Directive (EU) 2024/1760 is amended as follows: (1) Article 1 is amended as follows: (a) paragraph 1 is replaced by the following: 1. This Directive lays down rules on: (a) obligations for companies regarding actual and potential adverse human rights impacts and adverse environmental impacts, with respect to their own operations, the operations of their subsidiaries, and the operations carried out by their business partners in the chains of activities of those companies; and (b) liability for violations of the obligations as referred to in point (a). ; (b) paragraph 2 is replaced by the following: 2. This Directive shall not constitute grounds for reducing the level of protection of human, employment and social rights, or of protection of the environment or of protection of the climate provided for by the national law of the Member States or by the collective agreements applicable at the time of the adoption of this Directive. However, the first sentence of this paragraph shall not prevent Member States from adjusting any national corporate sustainability due diligence laws applicable at the time of the adoption of this Directive, in particular their scope, with a view to aligning them with this Directive. ; (c) the following paragraph is added: 4. This Directive does not affect Union or national law relating to matters other than those set out in paragraph 1. In particular, the rules referred to in point (a) of paragraph 1 do not affect Union or national law concerning human, employment or social rights, or the protection of the environment and climate change other than general due diligence obligations. ; (2) Article 2 is amended as follows: (a) paragraph 1 is amended as follows: (i) point (a) is replaced by the following: (a) the company had more than 5000 employees on average and had a net worldwide turnover of more than EUR 1500000000 in the last financial year for which annual financial statements have been or should have been adopted; ; (ii) point (c) is replaced by the following: (c) the company entered into or is the ultimate parent company of a group that entered into franchising or licensing agreements in the Union in return for royalties with independent third-party companies, where those agreements ensure a common identity, a common business concept and the application of uniform business methods, and where those royalties amounted to more than EUR 75000000 in the last financial year for which annual financial statements have been or should have been adopted, and provided that the company had or is the ultimate parent company of a group that had a net worldwide turnover of more than EUR 275000000 in the last financial year for which annual financial statements have been or should have been adopted. ; (b) paragraph 2 is amended as follows: (i) point (a) is replaced by the following: (a) the company generated a net turnover of more than EUR 1500000000 in the Union in the financial year preceding the last financial year; ; (ii) point (c) is replaced by the following: (c) the company entered into or is the ultimate parent company of a group that entered into franchising or licensing agreements in the Union in return for royalties with independent third-party companies, where those agreements ensure a common identity, a common business concept and the application of uniform business methods, and where those royalties amounted to more than EUR 75000000 in the Union in the financial year preceding the last financial year; and provided that the company generated, or is the ultimate parent company of a group that generated, a net turnover of more than EUR 275000000 in the Union in the financial year preceding the last financial year. ; (c) in paragraph 3, the first subparagraph is replaced by the following: 3. Where the ultimate parent company has as its main activity the holding of shares in operational subsidiaries and does not engage in taking management, operational or financial decisions affecting the group or one or more of its subsidiaries, it may be exempted from carrying out the obligations under this Directive. That exemption is subject to the condition that one of the ultimate parent company’s subsidiaries established in the Union is designated to fulfil the obligations set out in Articles 6 to 16 on behalf of the ultimate parent company, including the obligations of the ultimate parent company with respect to the activities of its subsidiaries. In such a case, the designated subsidiary is given all the necessary means and legal authority to fulfil those obligations in an effective manner, in particular to ensure that the designated subsidiary obtains from the companies of the group the relevant information and documents to fulfil the obligations of the ultimate parent company under this Directive. ; (3) Article 3(1) is amended as follows: (a) point (n) is replaced by the following: (n) stakeholders means the company’s employees, the employees of its subsidiaries and of its business partners, and their trade unions and workers’ representatives, and individuals or communities whose rights or interests are or could be directly affected by the products, services and operations of the company, its subsidiaries and its business partners and the legitimate representatives of those individuals or communities; ; (b) point (u) is replaced by the following: (u) risk factors means facts, situations or circumstances that relate to the severity and likelihood of an adverse impact, including facts, situations or circumstances at the level of the business partner, such as whether the business partner is not a company covered by this Directive or other comparable mandatory sustainability due diligence legal acts; at the level of geography and context, such as the level of law enforcement with respect to the type of adverse impact; and at the level of sectors, of business operations, and of products and services; ; (4) Article 4 is replaced by the following: Article 4 Level of harmonisation 1. Without prejudice to Article 1(2) and (3), Member States shall not introduce, in their national law, provisions within the field covered by this Directive laying down human rights and environmental due diligence obligations diverging from those laid down in Articles 6, 8 and 9, Article 10(1) to (5), Article 11(1) to (6) and Articles 14 to 16. 2. Notwithstanding paragraph 1, this Directive shall not preclude Member States from introducing, in their national law, more stringent provisions diverging from those laid down in provisions other than Articles 6, 8 and 9, Article 10(1) to (5), Article 11(1) to (6) and Articles 14 to 16, or provisions that are more specific in terms of the objective or the field covered, including by regulating specific products, services or situations, in order to achieve a different level of protection of human, employment and social rights, the environment or the climate. ; (5) Article 6 is amended as follows: (a) paragraph 1 is replaced by the following: 1. Member States shall ensure that parent companies falling under the scope of this Directive are allowed to fulfil the obligations set out in Articles 7 to 16 on behalf of companies which are subsidiaries of those parent companies and fall under the scope of this Directive, if this ensures effective compliance. This is without prejudice to such subsidiaries being subject to the exercise of the supervisory authority’s powers in accordance with Article 25 and to their civil liability in accordance with Article 29. ; (b) in paragraph 2, point (e) is replaced by the following: (e) where relevant, the subsidiary seeks contractual assurances from a direct business partner in accordance with Article 10(2), point (b), or Article 11(3), point (c), seeks contractual assurances from an indirect business partner in accordance with Article 10(4) or Article 11(5) and suspends the business relationship in accordance with Article 10(6) or Article 11(7). ; (c) paragraph 3 is deleted; (6) Article 8 is amended as follows: (a) paragraph 2 is replaced by the following: 2. As part of the obligation set out in paragraph 1, companies shall take appropriate measures to do the following, taking into account relevant risk factors including facts, situations or circumstances at the level of the business partner, such as whether the business partner is not a company covered by this Directive or other comparable mandatory sustainability due diligence legal acts; at the level of geography and context, such as the level of law enforcement with respect to the type of adverse impact; and at the level of sectors, of business operations, and of products and services: (a) carry out a scoping exercise, based solely on reasonably available information, to identify general areas across their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners where adverse impacts are most likely to occur and to be most severe; (b) based on the results of the scoping exercise referred to in point (a), carry out an in-depth assessment in the areas where adverse impacts were identified to be most likely to occur and most severe. ; (b) the following paragraph is inserted: 2a. Member States shall ensure that, for the purposes of the in-depth assessment referred to in paragraph 2, point (b): (a) companies may request information from business partners only where that information is necessary, and, in the case of business partners with fewer than 5000 employees, only when the information cannot reasonably be obtained by other means; (b) where the necessary information can be obtained from different business partners, companies prioritise requesting information, where reasonable, directly from the business partner or partners where the adverse impacts are most likely to occur; (c) where adverse impacts are identified as equally likely to occur or equally severe in several areas, companies may prioritise assessing such areas which involve direct business partners. ; (c) paragraph 3 is replaced by the following: 3. Member States shall ensure that, for the purposes of identifying and assessing the adverse impacts referred to in paragraph 1 of this Article based on, where appropriate, quantitative and qualitative information, companies are entitled to make use of appropriate resources, including independent reports, digital solutions, industry and multi-stakeholder initiatives and information gathered through the notification mechanism and the complaints procedure provided for in Article 14. ; (d) paragraph 4 is deleted; (7) in Article 9, the following paragraph is added: 4. Where prioritisation decisions are made in accordance with this Article, the mere fact of not having addressed a less significant adverse impact shall not expose the company to penalties pursuant to Article 27. ; (8) in Article 10, paragraph 6 is replaced by the following: 6. As regards potential adverse impacts as referred to in paragraph 1 that could not be prevented or adequately mitigated by the measures set out in paragraphs 2, 4 and 5, the company shall, as a last resort and until the impact is addressed: (a) refrain from entering into new, or extending existing, relationships with a business partner in connection with which, or in the chain of activities of which, the impact has arisen; (b) where the law governing its relationship with the business partner concerned so entitles it, suspend the business relationship with respect to the activities concerned, including with a view to using or increasing its leverage, and (c) adopt and implement an enhanced prevention action plan for the specific adverse impact without undue delay, provided that there is a reasonable expectation that such efforts will succeed. As long as there is a reasonable expectation that the enhanced prevention action plan will succeed, the mere fact of continuing to engage with the business partner shall not expose the company to penalties pursuant to Article 27 or to liability under Article 29. Prior to suspending a business relationship, the company shall assess whether the adverse impacts from doing so can be reasonably expected to be manifestly more severe than the adverse impact that could not be prevented or adequately mitigated. Should that be the case, the company shall not be required to suspend the business relationship and shall be in a position to report to the competent supervisory authority about the duly justified reasons for such a decision. Member States shall provide for an option to suspend the business relationship in contracts governed by their laws in accordance with the first subparagraph, except for contracts where the parties are obliged by law to enter into them. Where the company decides to suspend the business relationship, it shall take steps to prevent, mitigate or bring to an end the impacts of the suspension, shall provide reasonable notice to the business partner concerned and shall keep that decision under review. Where the company decides not to suspend the business relationship pursuant to this Article, it shall monitor the potential adverse impact and periodically assess its decision and whether further appropriate measures are available. ; (9) in Article 11, paragraph 7 is replaced by the following: 7. As regards actual adverse impacts as referred to in paragraph 1 that could not be brought to an end or the extent of which could not be minimised by the measures set out in paragraphs 3, 5 and 6, the company shall, as a last resort and until the impact is addressed: (a) refrain from entering into new, or extending existing, relationships with a business partner in connection with which, or in the chain of activities of which, the impact has arisen; (b) where the law governing its relationship with the business partner concerned so entitles it, suspend the business relationship with respect to the activities concerned, including with a view to using or increasing its leverage, and (c) adopt and implement an enhanced corrective action plan for the specific adverse impact without undue delay, provided that there is a reasonable expectation that such efforts will succeed. As long as there is a reasonable expectation that the enhanced corrective action plan will succeed, the mere fact of continuing to engage with the business partner shall not expose the company to penalties pursuant to Article 27 or to liability under Article 29. Prior to suspending a business relationship, the company shall assess whether the adverse impacts from doing so can be reasonably expected to be manifestly more severe than the adverse impact that could not be brought to an end or the extent of which could not be adequately minimised. Should that be the case, the company shall not be required to suspend the business relationship and shall be in a position to report to the competent supervisory authority about the duly justified reasons for such a decision. Member States shall provide for an option to suspend the business relationship in contracts governed by their laws in accordance with the first subparagraph, except for contracts where the parties are obliged by law to enter into them. Where the company decides to suspend the business relationship, it shall take steps to prevent, mitigate or bring to an end the impacts of the suspension, shall provide reasonable notice to the business partner concerned and shall keep that decision under review. Where the company decides not to suspend the business relationship pursuant to this Article, it shall monitor the actual adverse impact and periodically assess its decision and whether further appropriate measures are available. ; (10) in Article 13, paragraph 3 is amended as follows: (a) the introductory wording is replaced by the following: Consultation of relevant stakeholders shall take place at the following stages of the due diligence process: ; (b) points (c) and (e) are deleted; (11) Article 15 is replaced by the following: Article 15 Monitoring Member States shall ensure that companies carry out periodic assessments of their own operations and measures, those of their subsidiaries and, where related to the chain of activities of the company, those of their business partners, to assess the implementation and to monitor the adequacy and effectiveness of the identification, prevention, mitigation, bringing to an end and minimisation of the extent of adverse impacts. Such assessments shall be based, where appropriate, on qualitative and quantitative indicators and be carried out without undue delay after a significant change occurs, but at least every 5 years and whenever there are reasonable grounds to believe that the measures are no longer adequate or effective or that new risks of the occurrence of those adverse impacts have arisen or may arise. Where appropriate, the due diligence policy, the adverse impacts identified and the appropriate measures that derived shall be updated in accordance with the outcome of such assessments and with due consideration of relevant information from stakeholders. ; (12) in Article 16, paragraph 3 is replaced by the following: By 31 March 2029, the Commission shall adopt delegated acts in accordance with Article 34 in order to supplement this Directive by laying down the content and criteria for the reporting under paragraph 1, specifying, in particular, sufficiently detailed information on the description of due diligence, actual and potential adverse impacts identified, and appropriate measures taken with respect to those impacts. In preparing those delegated acts, the Commission shall take due account of, and align them as appropriate with, the sustainability reporting standards adopted pursuant to Articles 29b and 40b of Directive 2013/34/EU. When adopting the delegated acts referred to in the first subparagraph, the Commission shall ensure that there is no duplication in reporting requirements for companies referred to in Article 3(1), point (a)(iii), that are subject to reporting requirements under Article 4 of Regulation (EU) 2019/2088, while maintaining in full the minimum obligations stipulated in this Directive. ; (13) Article 17 is amended as follows: (a) in paragraph 1, the first subparagraph is replaced by the following: From 1 January 2031, Member States shall ensure that, when making public the annual statement referred to in Article 16(1) of this Directive, companies submit that statement at the same time to the collection body referred to in paragraph 3 of this Article for the purpose of making it accessible on the European single access point (ESAP), as established by Regulation (EU) 2023/2859. ; (b) paragraph 3 is replaced by the following: 3. By 31 December 2030, for the purpose of making the information referred to in paragraph 1 of this Article accessible on ESAP, Member States shall designate at least one collection body, as defined in Article 2, point (2), of Regulation (EU) 2023/2859, and notify the European Securities and Markets Authority thereof. ; (14) Article 18 is replaced by the following: Article 18 Model contractual clauses In order to provide support to companies to facilitate their compliance with Article 10(2), point (b), and Article 11(3), point (c), the Commission, in consultation with Member States and stakeholders, shall adopt guidance about voluntary model contractual clauses, by 26 July 2027. ; (15) Article 19 is amended as follows: (a) in paragraph 2, point (b) is deleted; (b) paragraph 3 is replaced by the following: 3. The guidelines referred to in paragraph 2, points (a), (d) and (e), shall be adopted by 26 July 2027. The guidelines referred to in paragraph 2, points (f) and (g), shall be adopted by 26 July 2028. ; (16) Article 22 is deleted; (17) Article 24 is amended as follows: (a) paragraph 1 is replaced by the following: 1. Each Member State shall designate one or more supervisory authorities to supervise compliance with the obligations laid down in the provisions of national law adopted pursuant to Articles 7 to 16. ; (b) paragraph 7 is replaced by the following: 7. By 26 July 2028, Member States shall inform the Commission of the names and contact details of the supervisory authorities designated pursuant to this Article, as well as of their respective competences where there are several designated supervisory authorities. They shall inform the Commission of any changes thereto. ; (18) in Article 25, paragraph 1 is replaced by the following: 1. Member States shall ensure that the supervisory authorities have adequate powers and resources to carry out the tasks assigned to them under this Directive, including the power to require companies to provide information and carry out investigations related to compliance with the obligations set out in Articles 7 to 16. ; (19) in Article 27, paragraph 4 is replaced by the following: 4. The Commission, in collaboration with Member States, shall issue guidance to assist supervisory authorities in determining the level of penalties in accordance with this Article. Member States shall ensure that the maximum limit of pecuniary penalties is set at 3 % of the net worldwide turnover of the company in the financial year preceding that of the decision to impose the fine or, in the case of ultimate parent companies as referred to in Article 2(1), points (b) and (c), and in Article 2(2), points (b) and (c), 3 % of the net consolidated worldwide turnover calculated at the level of the ultimate parent company, in the financial year preceding that of the decision to impose the fine. ; (20) Article 29 is amended as follows: (a) paragraph 1 is deleted; (b) paragraph 2 is replaced by the following: 2. Where a company is held liable pursuant to national law for damage caused to a natural or legal person by a failure to comply with the due diligence requirements under this Directive, Member States shall ensure that those persons have a right to full compensation. Full compensation shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages. ; (c) in paragraph 3, point (d) is deleted; (d) paragraph 4 is replaced by the following: 4. Companies that have participated in industry or multi-stakeholder initiatives, or used independent third-party verification or contractual clauses to support the implementation of due diligence obligations may nevertheless be held liable in accordance with national law. ; (e) in paragraph 5, the first subparagraph is replaced by the following: The civil liability of a company for damages as referred to in this Article shall be without prejudice to the civil liability of its subsidiaries or of any direct and indirect business partners in the chain of activities of the company. ; (f) paragraph 7 is deleted; (21) Article 36 is amended as follows: (a) paragraph 1 is deleted; (b) paragraph 2 is amended as follows: (i) the introductory wording is replaced by the following: By 26 July 2031, and every five years thereafter, the Commission shall submit a report to the European Parliament and to the Council on the implementation of this Directive and its effectiveness and efficiency in reaching its objectives, in particular in addressing adverse impacts. The report shall be accompanied, if appropriate, by a legislative proposal. The first report shall, inter alia, assess the following issues: ; (ii) in point (b), the third indent is replaced by the following: – whether the thresholds regarding the relevant turnover and, for companies which are formed in accordance with the legislation of a Member State, the number of employees laid down in Article 2 need to be revised and whether a sector-specific approach needs to be introduced in high-risk sectors, and, in particular, whether companies with a relevant turnover of more than EUR 450000000 and, for companies which are formed in accordance with the legislation of a Member State, more than 1000 employees on average during the financial year and, in addition to that, companies operating in high-risk sectors should be covered by this Directive; ; (iii) point (e) is deleted; (iv) point (f) is replaced by the following: (f) the effectiveness of the enforcement mechanisms put in place at national level, including their protective effects on rightsholders. ; (22) in Article 37, paragraph 1 is replaced by the following: 1. Member States shall adopt and publish, by 26 July 2028, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate the text of those measures to the Commission. They shall apply those measures from 26 July 2029 with the exception of the measures necessary to comply with Article 16, which Member States shall apply for financial years starting on or after 1 January 2030. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made..