On June 1, 2023, the European Parliament adopted amendments to the European Commission’s Directive on human rights and environmental due diligence proposal submitted in February 2022. These amendments strengthen the alignment of the Directive with the UN Guiding Principles on Business and Human Rights.
Key takeaways:
1. The scope of applicability is broadened. EU companies with more than 250 employees and net worldwide turnover of more than 40€ million or companies not meeting such thresholds but that are the ultimate parent company of a group that have 500 employees and a net worldwide turnover of more than 150€ million fall under the scope of the Directive.
2. Respect of international humanitarian law and the conduct of heightened, conflict-sensitive due diligence is introduced for companies operating in conflict-affected areas, areas under occupation or annexation or failed states.
3. When not all the necessary information regarding the value chain is available, companies must demonstrate their efforts to obtain such information.
4. Adapting business models and strategies including purchasing practices is identified as a measure companies may be required to take to prevent or stop an impact.
5. The concept of responsible disengagement is introduced.
6. Affected stakeholders must be allowed to request additional written information which must be provided by companies within a reasonable amount of time and in an appropriate and comprehensible format.
7. Pecuniary sanctions must be based on companies’ net worldwide turnover, and the maximum limit must not be less than 5% of the net worldwide turnover.
8. The limitation period for bringing actions for damages is at least 10 years.
9. When claimants provide elements substantiating the likelihood of a company’s liability and have indicated that additional evidence lies in the control of the company, courts are able to order that such evidence be disclosed by the company.
