Changes from report parliamentary committee draft to plenary report

AddedArticle 7 – paragraph 2 – introductory part: 2. Companies shall be required to take appropriate measures, including the following actions, where relevant:

RemovedArticle 7 – paragraph 2 – point c: (c) make necessary modifications, improvements to, or investments in, the company’s own operations, such as into management, production or other operational processes, facilities, products and product traceability, services and skills, in order to prevent or mitigate potential adverse impacts;

AddedArticle 7 – paragraph 2 – point a: (a) where necessary due to the nature or complexity of the measures required for prevention, develop and implement a prevention action plan, with a reasonable and clearly defined timeline for the implementation of appropriate measures and action, and qualitative and quantitative indicators for measuring improvement. The prevention action plan shall be applicable and accurately tailored to the context of companies’ operations and value chain. The development and implementation of a climate transition plan according to Article 15 shall be considered an appropriate measure to prevent environmental adverse impacts related to climate change mitigation pursuant to paragraph 1 of this Article;

RemovedArticle 7 – paragraph 2 – point c a (new): (ca) adapt business models and strategies, including trading, procurement and pricing practices, in order to prevent potential adverse impacts;

AddedArticle 7 – paragraph 2 – point b: (b) consider establishing through contractual provisions with a partner with whom it has a business relationship that it will ensure compliance with the company’s code of conduct and, as necessary, a prevention action plan. Partners with whom the company has a business relationship could be asked to establish corresponding reasonable, non-discriminatory and fair contractual provisions with their partners, to the extent that their activities are part of the company’s value chain. When such contractual assurances are obtained, paragraph 4 shall apply;

RemovedArticle 7 – paragraph 2 – point d: (d) provide targeted and proportionate support for an SME with which the company has a business relationship;

AddedArticle 7 – paragraph 2 – point c: (c) make necessary modifications, improvements to, withdrawals of or investments in, the company’s own operations, such as into management, production or other operational processes, facilities, products and product traceability, projects, services and skills;

Change 44

ChangedArticle 7 – paragraph 2 – point dc a (new): (da)(ca) engageadapt withbusiness amodels partnerand withstrategies, whichincluding thepurchasing companypractices, hasincluding athose businesswhich relationshipcontribute aboutto theliving company’swages expectationsand withincomes regardsfor totheir preventingsuppliers, andin mitigatingorder theto prevent potential adverse impacts, includingand providingdevelop orand enablinguse accesspurchase topolicies capacity-building,that guidance,do financialnot supportencourage orpotential participationadverse inimpacts collaborativeon initiatives;human andrights or the environment;

Change 45

RemovedArticle 7 – paragraph 2 – point e: (e) in compliance with Union law including competition law, collaborate with other entities, including, where relevant to the circumstances , to increase the company’s ability to bring the adverse impact to an end, in particular where no other action is suitable or effective.

AddedArticle 7 – paragraph 2 – point d: (d) provide targeted and proportionate financial and administrative support for an SME with which the company has a business relationship;

AddedArticle 7 – paragraph 2 – point d a (new): (da) engage with a business relationship about the company’s expectations with regard to preventing and mitigating the potential adverse impacts, including by providing or enabling access to capacity-building, guidance, administrative and financial support such as loans or financing, taking into consideration the resources, knowledge and constraints of the business partner;

AddedArticle 7 – paragraph 2 – point e: (e) in compliance with Union law including competition law, collaborate with other entities, including to increase the company’s ability to bring the adverse impact to an end, in particular where no other action is suitable or effective.

AddedArticle 7 – paragraph 2 – point e a (new): (ea) when there is a direct linkage to impacts occurring in business relationships with other companies operating in the Union, appropriate measures can include notifying the relevant supervisory authority while continuing to make reasonable efforts to seek to prevent or mitigate the impact.

AddedArticle 7 – paragraph 2 a (new): 2a. When distributing or selling a product or providing a service, companies shall take appropriate measures to ensure that the composition, design and commercialisation of a product or service is in line with Union law and does not lead to adverse impacts, be it individual or collective. In this regard, particular attention shall be paid to potential adverse impact on children.

Article 7 – paragraph 3: deleted

Change 46

ChangedArticle 7 – paragraph 4 – subparagraph 1: The contractual provisions or the contract shall be accompanied by measures to support carrying out due diligence. For the purposes of carrying out due diligence as provided for in this Directive, the company may refer to suitable and credible industry initiatives or independent third-party verification. However the sole reference to such initiatives or verification shall not be sufficient to satisfy the due diligence requirements of this Directive.

Change 47

ChangedArticle 7 – paragraph 4 – subparagraph 2 a (new): The2: contractualWhen provisionsprovisions, soughtincluding incontractual, accordanceare withestablished, paragraphor 2a shallcontract notis beentered suchinto, aswith toa resultbusiness inrelationship, the transfer of responsibility for carrying outterms dueused diligenceshall inbe accordancefair, withreasonable thisand Directive.non-discriminatory. /Where Themeasures existenceto ofverify suchcompliance contractualare provisionscarried shallout in norelation wayto precludeSMEs, the company fromshall takingbear the measurescost providedof forthe inindependent thisthird-party Directive,verification. andAt liabilitythe forrequest failureof tothe doSME, so.they /shall Incover seekingthe suchcosts contractualin provisions,full companiesor shall assessshare whetherthem with the businesscompany. partnerSMEs canmay reasonablyshare bethe expectedresults toof carryverifications carried out duein diligencerelation into linethemselves with thismultiple Directive,companies. taking/ intoThe account,contractual amongstprovisions othersought factors,in theaccordance sector,with contextparagraph and2 levelshall ofnot riskbe ofsuch theas businessto relationshipresult andin the business partner; thetransfer resources,of experience,responsibility historyfor andcarrying credentialsout ofdue eachdiligence businessin partner;accordance andwith anythis supportDirective givenand byof the companyliability concernedfor tofailing itsto businessdo partner.so. / In cases whereseeking such contractual provisions are breached, giving riseprovisions, tocompanies potentialshall adverseassess impacts,whether the companybusiness shallpartner firstcan takereasonably appropriatebe measuresexpected to prevent or adequately mitigate such impacts, before considering the termination or suspensioncomply ofwith thethose contract.provisions.

Change 48

ChangedArticle 7 – paragraph 5 – subparagraph 1 – introductory part: As regards potential adverse impacts within the meaning of paragraph 1 that could nota becompany preventedcaused or adequately mitigated by thecontributed measuresto inand paragraphsthat 2,could 3not andbe 4prevented or any otheradequately means,mitigated, and where there is no reasonable prospect of change, the company shall be required to refrain from entering into new or extending existing relations with the partner in connection with or in the value chain of which the impact has arisenarisen, and shall, where the law governing their relations so entitles them to, take the following actions:actions as a last resort, in line with responsible disengagement:

Article 7 – paragraph 5 – subparagraph 1 – point a: (a) temporarily suspend commercial relations with the partner in question, while pursuing prevention and mitigation efforts;

Change 49

ChangedArticle 7 – paragraph 5 – subparagraph 1 – point b: (b) 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 under point (a) are not met.

Change 50

ChangedArticle 7 – paragraph 5 – subparagraph 2:1 a (new): Prior to temporarily suspending commercial relations or terminating the business relationship, companies shall first be required to assess, in consultation with relevant stakeholders,assess whether the adverse impacts of doing so would be greater than the adverse impact which is intended to be prevented or mitigated. Should that be the case, companies may refrain from temporarily suspending commercial relations or terminating the business relationship. Where companies do temporarily suspend commercial relations or terminate the business relationship, they shall take steps to prevent, mitigate, or bring to an end suchthe impacts,impacts of suspension or termination, provide reasonable notice to the business partner and keep that decision under review. Member States shall provide for the availability of an option to suspend or terminate a business relationship in contracts governed by their laws.

Change 51

RemovedArticle 7 – paragraph 5 a (new): 5a. For the purposes of this Article, in cases where a company may cause an adverse impact, appropriate measures shall be understood as measures which aim to prevent or mitigate a potential adverse impact. In cases where a company may contribute to an adverse impact, appropriate measures shall 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 potential adverse impact. In cases where a company’s operations, products or services may be directly linked to an adverse impact through its relationships with other entities, appropriate measures shall be understood as measures which aim to use or increase the company’s leverage with responsible parties to seek to prevent or mitigate the potential adverse impact.

AddedArticle 7 – paragraph 5 – subparagraph 2: Member States shall provide for the availability of an option to suspend or terminate a business relationship in contracts governed by their laws, except for contracts where the parties are obliged by law to enter into them. Companies may refer to supervisory authorities to receive guidance on the course of action to take.

RemovedArticle 7 – paragraph 6: deleted

AddedArticle 7 – paragraph 6: 6. By way of derogation from paragraph 5, first subparagraph, point (b), when companies referred to in Article 3, point (a)(iv), provide financial services to entities that cause or contribute to potential adverse impacts within the meaning of paragraph 1, they shall not be required to terminate the financial service contract if this is strictly necessary to prevent bankruptcy to the entity to whom that service is being provided. In addition to paragraph 5, second subparagraph, a decision to terminate the financial service contract in derogation from paragraph 5, first subparagraph, point (b) may only be taken, as a last resort, if the leverage efforts of companies referred to in Article 3, point (a)(iv) have ultimately failed to influence the entity to whom that service is being provided to prevent or adequately mitigate adverse potential impacts.

Change 52

ChangedArticle 8 – paragraph 1: 1. Member States shall ensure that companies take appropriate measures to bring actual adverse impacts that have been, or should have been, identified pursuant to Article 6 to an end, in accordance with paragraphs 2 to 6a of this Article.

Change 53

ChangedArticle 8 – paragraph 2: 2. Where the adverse impact cannot immediately be brought to an end, Member States shall ensure that companies adequately mitigate the extent of such an impact, while pursuing all efforts to bring the adverse impact to an end.

Change 54

ChangedArticle 8 – paragraph 2 a (new): 2a. WithoutFor prejudicethe topurposes paragraphof 2,this Article, in cases where it isa notcompany possiblehas tocaused bringan toactual animpact, endappropriate ormeasures mitigateshall allbe identifiedunderstood adverseas impactsmeasures simultaneously,which companiesaim mayto prioritisemitigate the orderextent inof whichan theyactual takeadverse appropriateimpact, measures.and Theyremediate shalldamage. doIn socases onwhere thea basiscompany ofhas thecontributed severityto andan likelihoodactual ofadverse impactsimpact, andappropriate inmeasures ashall mannerbe informedunderstood byas meaningfulmeasures engagementwhich withaim affectedto stakeholders.mitigate Thethe severitycontribution ofto anthe adverseimpact, impactusing shallor beincreasing determinedthe basedcompany’s onleverage itswith gravity,other theresponsible numberparties ofto individualsmitigate thatthe arepotential oradverse willimpact beand affected,contribute orto remediating damage, to the extent of the damagecontribution. orIn potentialcases damagewhere to,a company’s operations, products or otherservices effectsare on,directly thelinked environment,to whetheran theadverse impact isthrough irreversibleits andrelationships anywith limitsother onentities, theappropriate abilitymeasures toshall restorebe affectedunderstood individualsas ormeasures thewhich environmentaim to ause situationor equivalentincrease tothe theircompany’s situationleverage priorwith toresponsible theparties impact.to Theseek company’sto degreemitigate ofthe influence,adverse leverageimpact. overA orcompany proximitydirectly linked to thean subsidiariesadverse orimpact entitiesshall withconsider whichusing itits hasleverage awith businessresponsible relationshipparties isto notenable relevantthe toremediation itsof prioritisationany decisionsdamage undercaused thisby Directive.an impact.

Change 55

RemovedArticle 8 – paragraph 3 – introductory part: 3. Companies shall be required to take appropriate measures, including the following actions, where relevant to the circumstances:

AddedArticle 8 – paragraph 2 b (new): 2b. For the purposes of this Article, it shall be presumed that financial undertakings are directly linked to an adverse impact in their value chain without causing or contributing to it.

RemovedArticle 8 – paragraph 3 – point a: (a) in accordance with Article 8a, neutralise the adverse impact or adequately mitigate its extent by restoring affected stakeholders and/or the environment to a situation equivalent to their situation prior to the impact, or as close as possible to that position in the circumstances, taking into account the perspectives of affected stakeholders and in particular the needs of vulnerable stakeholders, including by the payment of damages to the affected persons and of financial compensation to the affected communities. The action shall be proportionate to the significance and scale of the adverse impact and to the contribution of the company’s conduct to the adverse impact;

AddedArticle 8 – paragraph 3 – introductory part: 3. Companies shall be required to take appropriate measures, including the following actions, where relevant:

Change 56

ChangedArticle 8 – paragraph 3 – point b: (b)a: where(a) necessaryin dueaccordance towith theArticle fact8c, thatneutralise the adverse impact cannotor beadequately immediatelymitigate broughtits toextent anby end,restoring developthe andaffected implementpersons and/or the environment to a correctivesituation actionequivalent planor withas reasonableclose andas clearlypossible definedto timelinestheir forsituation appropriateprior measuresto andthe impact. The action shall be proportionate and qualitativecommensurate to the significance and quantitativescale indicatorsof forthe measuringadverse improvement.impact Theand correctiveto actionthe plancontribution shallof bethe developedcompany’s inconduct consultationto withthe affectedadverse stakeholders;impact and to its resources and leverage;

Change 57

RemovedArticle 8 – paragraph 3 – point c: (c) establish through reasonable and equitable contractual provisions with a partner with whom it has a business relationship that it will participate in carrying out due diligence as provided for in this Directive, and ensure it respects, as necessary, a corrective action plan. Partners with whom the company has a business relationship shall be asked to establish corresponding reasonable and equitable contractual provisions with their partners, to the extent that they are part of the value chain (contractual cascading). When such contractual assurances are obtained, paragraph 5 shall apply.

AddedArticle 8 – paragraph 3 – point b: (b) where necessary due to the fact that the adverse impact cannot be immediately brought to an end, 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. The preventative action plan shall be applicable and accurately tailored to the context of companies’ operations and value chain. Companies may develop their action plans in cooperation with industry initiatives. The development and implementation of a climate transition plan according to Article 15 shall be considered an appropriate measure to minimise environmental adverse impacts related to climate change mitigation pursuant to paragraphs 1 and 2 of this Article;

RemovedArticle 8 – paragraph 3 – point d: (d) make necessary modifications, improvements to or investments in the company’s own operations, such as into management, production or other operational processes, facilities, products and product traceability, services and skills, in order to bring the impact to an end, remedy it or prevent it from recurring;

AddedArticle 8 – paragraph 3 – point c: (c) choose to establish through contractual provisions with a partner with whom it has a business relationship that it will ensure compliance with a company’s code of conduct, and as necessary, a corrective action plan. Partners with whom the company has a business relationship could be asked to establish corresponding reasonable, non-discriminatory and fair contractual provisions with their partners, to the extent that they are part of the value chain. When such contractual assurances are obtained, paragraph 5 shall apply;

RemovedArticle 8 – paragraph 3 – point d a (new): (da) adapt business models and strategies, including trading, procurement and pricing practices, in order to bring to an end or mitigate adverse impacts;

AddedArticle 8 – paragraph 3 – point d: (d) make necessary modifications, improvements to, withdrawals of or investments in, the company’s own operations, such as into management, production or other operational processes, facilities, products and product traceability, projects, services and skills;

RemovedArticle 8 – paragraph 3 – point e: (e) provide targeted and proportionate support for an SME with which the company has a business relationship;

AddedArticle 8 – paragraph 3 – point d a (new): (da) adapt business models and strategies, including purchasing practices, including those which contribute to living wages and incomes for their suppliers, in order to bring to an end or mitigate actual adverse impacts, and develop and use purchase policies that do not encourage actual adverse impacts on human rights or the environment;

Change 58

ChangedArticle 8 – paragraph 3 – point ee: a(e) (new):provide (etargeted a)and engageproportionate withfinancial aand partneradministrative support for an SME with which the company has a business relationship about the company’s expectations with regard to bringing to an end and mitigating adverse impacts, including providing or enabling access to capacity-building, guidance, financial support or participation in collaborative initiatives; andrelationship;

Change 59

RemovedArticle 8 – paragraph 3 – point f: (f) in compliance with Union law including competition law, collaborate with other entities, including, where relevant to the circumstances, to increase the company’s ability to bring the adverse impact to an end, in particular where no other action is suitable or effective.

AddedArticle 8 – paragraph 3 – point e a (new): (ea) engage with a business relationship about the company’s expectations with regard to bringing to an end and mitigating actual adverse impacts, including by providing or enabling access to capacity-building, guidance, administrative and financial support such as loans or financing, taking into consideration the resources, knowledge and constraints of the business partner;

AddedArticle 8 – paragraph 3 – point f a (new): (fa) when there is a direct linkage to impacts occurring in business relationships with other companies operating in the Union, appropriate measures can include notifying the relevant supervisory authority while continuing to make reasonable efforts to seek to bring the impact to an end or mitigate the impact.

AddedArticle 8 – paragraph 3 a (new): 3a. When distributing or selling a product or providing a service, companies shall take appropriate measures to ensure that the composition, design and commercialisation of a product or service is in line with Union law and does not lead to adverse impacts, be it individual or collective. In this regard, particular attention shall be paid to potential adverse impact on children.

Article 8 – paragraph 4: deleted

Change 60

ChangedArticle 8 – paragraph 5 – subparagraph 1: The contractual provisions or the contract shall be accompanied by measures to support carrying out due diligence. For the purposes of carrying out due diligence as outlined in this Directive, the company may refer to suitable and credible industry initiatives or independent third-party verification. However, the sole reference to such initiatives or verification shall not be sufficient to satisfy the due diligence requirements of this Directive.

Change 61

RemovedArticle 8 – paragraph 5 – subparagraph 2 a (new): The contractual provisions sought in accordance with paragraph 3 shall not be such as to result in the transfer of responsibility for carrying out due diligence in line with this Directive. / The existence of such contractual provisions shall in no way preclude the company from taking the measures provided for in this Directive, and liability for failure to do so. / In seeking such contractual provisions, companies shall assess whether the business partner can reasonably be expected to carry out due diligence in accordance with this Directive, taking into account, amongst other factors, the sector, context and level of risk of the business relationship and the business partner; the resources, experience, history and credentials of each business partner; and any support given by the company concerned to its business partner. / In cases where such contractual provisions are breached which may have given rise to actual adverse impacts, the company shall first take appropriate measures to bring such impacts to an end, before considering the termination or suspension of the contract.

AddedArticle 8 – paragraph 5 – subparagraph 2: When provisions, including contractual, are established, or a contract is entered into, with a business relationship, the terms used shall be fair, reasonable and non-discriminatory. Where measures to verify compliance are carried out in relation to SMEs, the company shall bear the cost of the independent third-party verification. SMEs may share the results of the verifications carried out in relation to themselves with multiple companies.

RemovedArticle 8 – paragraph 6 – subparagraph 1 – introductory part: As regards actual adverse impacts within the meaning of paragraph 1 that could not be brought to an end or the extent of which could not be mitigated by the measures provided for in paragraphs 3, 4 and 5 or any other means and where there is no reasonable prospect of change, the company shall refrain from entering into new or extending existing relations with the partner in connection to or in the value chain of which the impact has arisen and shall, where the law governing their relations so entitles them to, take one of the following actions:

AddedArticle 8 – paragraph 5 – subparagraph 2 a (new): The contractual provisions sought in accordance with paragraph 3 shall 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.

Change 62

ChangedArticle 8 – paragraph 65 – subparagraph 12 –b point(new): a:In (a)seeking temporarilysuch suspendcontractual commercialprovisions, relationshipscompanies withshall theassess partnerwhether inthe question,business whilepartner pursuingcan effortsreasonably tobe bringexpected to an end or mitigate the extent of thecomply adversewith impact,those orprovisions.

Change 63

RemovedArticle 8 – paragraph 6 – subparagraph 1 – point b: (b) terminate the business relationship with respect to the activities concerned, on account of the severity of the adverse impact.

AddedArticle 8 – paragraph 6 – subparagraph 1 – introductory part: As regards actual adverse impacts within the meaning of paragraph 1 that a company caused or contributed to, and that could not be brought to an end or the extent of which could not be mitigated, and where there is no reasonable prospect of change, the company shall be required to refrain from entering into new or extending existing relations with the partner in connection to or in the value chain of which the impact has arisen and shall, where the law governing their relations so entitles them to, take one of the following actions as a last resort, in line with responsible disengagement:

RemovedArticle 8 – paragraph 6 – subparagraph 2: Prior to temporarily suspending commercial relations or terminating the business relationship, companies shall first be required to assess, in consultation with relevant stakeholders, whether the adverse impacts of doing so would be greater than the adverse impact which is intended to be brought to an end or mitigated. Should this be the case, companies may refrain from temporarily suspending commercial relations or terminating the business relationship. Where companies do temporarily suspend commercial relations or terminate the business relationship, they shall take steps to prevent, mitigate or bring to an end such impacts, provide reasonable notice to the business partner and keep that decision under review. Member States shall provide for the availability of an option to suspend or terminate the business relationship in contracts governed by their laws.

AddedArticle 8 – paragraph 6 – subparagraph 1 – point a: (a) temporarily suspend commercial relationships with the partner in question, while pursuing prevention and mitigation efforts

RemovedArticle 8 – paragraph 6 a (new): 6a. For the purposes of this Article, in cases where a company has caused an impact, appropriate measures shall be understood as measures which aim to mitigate an adverse impact, and remediate damage. In cases where a company has contributed to an adverse impact, appropriate measures shall be understood as measures which aim to mitigate the contribution to the impact, using or increasing the company’s leverage with other responsible parties to mitigate the potential adverse impact and contribute to remediating damage, to the extent of the contribution. In cases where a company’s operations, products or services are directly linked to an adverse impact through its relationships with other entities, appropriate measures shall be understood as measures which aim to use or increase the company’s leverage with responsible parties to seek to mitigate the adverse impact. A company directly linked to an adverse impact shall consider using its leverage with responsible parties to enable the remediation of any damage caused by an impact.

AddedArticle 8 – paragraph 6 – subparagraph 1 – point b: (b) 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 under point (a) are not met.

RemovedArticle 8 – paragraph 7: deleted