Changes from adopted text to adopted text

RemovedArticle 3 – paragraph 1 – point a – point iii: deleted

RemovedArticle 3 – paragraph 1 – point a – point iv – indent 8: deleted / (deleted) / (deleted)

RemovedArticle 3 – paragraph 1 – point a – point iv – indent 9: deleted

RemovedArticle 3 – paragraph 1 – point a – point iv – indent 10: deleted

RemovedArticle 3 – paragraph 1 – point a a (new): (aa) 'investee company' means a company in which an institutional investor or asset manager invests which cannot be considered as a controlled undertaking;

RemovedArticle 3 – paragraph 1 – point a b (new): (ab) 'institutional investor' means an entity as defined by Article 2(e) of Directive 2007/36/EC, within the scope of Article 2 of this Directive;

RemovedArticle 3 – paragraph 1 – point a c (new): (ac) 'asset manager' means an entity as defined by Article 2(f) of Directive 2007/36/EC, within the scope of Article 2 of this Directive;

RemovedArticle 3 – paragraph 1 – point b: (b) ‘adverse environmental impact’ means an adverse impact on the environment resulting from the failure to comply with obligations in line with the relevant provisions of the instruments listed in Part I, points 18 and 19, of the Annex and Part II of the Annex, taking into account, where available, the national legislation and measures linked to those provisions related to the international texts listed in Part I, points 18 and 19, of the Annex and Part II of the Annex;

RemovedArticle 3 – paragraph 1 – point c: (c) ‘adverse human rights impact’ means an adverse impact on persons resulting from any action which removes or reduces the ability of an individual or group to enjoy the rights or to be protected by prohibitions enshrined in international conventions and instruments listed in the Annex, Part I, Section 1 and Annex, Part I, Section 2;

RemovedArticle 3 – paragraph 1 – point c a (new): (ca) ‘adverse impact’ means any potential or actual adverse human rights or adverse environmental impact;

RemovedArticle 3 – paragraph 1 – point d: (d) ‘subsidiary’ means a legal person as defined in Article 2, point (10), of Directive 2013/34/EU and a legal person through which the activity of a ‘controlled undertaking’ as defined in Article 2(1), point (f), of Directive 2004/109/EC of the European Parliament and of the Council 128 is exercised;

RemovedArticle 3 – paragraph 1 – point e – introductory part: (e) ‘business relationship’ means a direct or indirect relationship of a company with a contractor, subcontractor, or other entities in its value chain:

RemovedArticle 3 – paragraph 1 – point e – point i: (i) with whom the company has a commercial agreement or to whom the company provides financial services;

RemovedArticle 3 – paragraph 1 – point e – point ii: (ii) that performs activities related to the products or services of the company;

RemovedArticle 3 – paragraph 1 – point f: deleted

RemovedArticle 3 – paragraph 1 – point g: (g) ‘value chain’ means:

RemovedAmendments 115 and 422cp2

RemovedArticle 3 – paragraph 1 – point g – point i (new)

RemovedAmendment: (i) activities related to, and entities involved in, the production, design, sourcing, extraction, manufacture, transport, storage and supply of raw materials, products or parts of a company’s product and the development of a company’s product or the development or provision of a service, and

RemovedArticle 3 – paragraph 1 – point g – point ii (new): (ii) activities related to, and entities involved in, the sale, distribution, transport, storage, and waste management of a company’s products or the provision of services, and excluding the waste management of the product by individual consumers.

RemovedArticle 3 – paragraph 1 – point g – subparagraph 1 a (new): As regards companies within the meaning of point (a)(iv), ‘value chain’ with respect to the provision of these specific services shall include the activities of the clients directly receiving such financial services provided by financial undertakings pursuant to point (iv) and of other companies belonging to the same group whose activities are linked to the contract in question. The value chain of regulated financial undertakings within the meaning of point (a)-(iv) does not cover households and natural persons or SMEs;

RemovedArticle 3 – paragraph 1 – point h: (h) ‘independent third-party verification’ means verification of aspects of the due diligence of a company or parts of its value chain resulting from the provisions of this Directive either by an auditor or an audit firm that is approved in accordance with Article 3 of Directive 2006/43/EC or accredited in a Member State for conducting certifications, or by an independent assurance services provider as defined in Article 2, point (23), of Directive 2006/43/EC accredited in a Member State in accordance with Regulation (EC) No 765/2008 of the European Parliament and of the Council for the specific conformity assessment activity referred to in Article 14(4a) or by an independent third party that is accredited in a Member State for conducting certifications and which is independent from the company, free from any conflicts of interests, has demonstrated experience, expertise and competence in environmental, climate, and human rights matters, and is accountable for the quality and reliability of the audit or assessment, and meets the minimum standards set out in the delegated act as described in Article 14(4a);

RemovedArticle 3 – paragraph 1 – point j: (j) ‘industry or multi-stakeholder initiative’ means an initiative that companies participate in, which provides standards, procedures, tools and/or mechanisms, in order to support, monitor, evaluate, certify, and/or verify aspects of their due diligence, or the due diligence conducted by their subsidiaries and/or business relationships. Such initiatives may be developed and overseen by governments, industry associations, groupings of interested organisations, or civil society organisations;

RemovedArticle 3 – paragraph 1 – point l: deleted

RemovedArticle 3 – paragraph 1 – point n: (n) ‘affected stakeholders’ means those individuals, groups or communities that have rights or legitimate interests that are affected or could be affected by the adverse impacts stemming from a company’s activities or actions or the activities or actions of entities in its value chain, and the legitimate representatives of such individuals or groups, including the workers and their representatives and the trade unions of the company, of its subsidiaries and throughout its value chain, or in cases where there are no individuals, groups or communities affected by an adverse impact on the environment, credible and experienced organisations whose purpose includes the protection of the environment;

RemovedArticle 3 – paragraph 1 – point n a (new): (na) ‘vulnerable stakeholders’ means affected stakeholders that find themselves in marginalised situations and situations of vulnerability, due to specific contexts or intersecting factors, including among others, sex, gender, age, race, ethnicity, class, caste, education, indigenous peoples, migration status, disability, as well as social and economic status, and includes stakeholders living in conflict-affected and high risk areas, which are the causes of diverse and often disproportionate adverse impacts, and create discrimination and additional barriers to participation and access to justice;

RemovedArticle 3 – paragraph 1 – point q: (q) ‘appropriate measures’ means 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. This shall take 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 and services, the specific business relationship;

RemovedArticle 3 – paragraph 1 – point q a (new): (qa) 'leverage' means the ability to affect change in the practices of the entity causing or contributing to the adverse impact;

RemovedArticle 3 – paragraph 1 – point q b (new): (qb) “to cause an adverse impact’ means that the company’s activities on their own are sufficient to result in an adverse impact;

RemovedArticle 3 – paragraph 1 – point q c (new): (qc) ‘to contribute to an adverse impact’ means that a company's 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. The following factors can be taken into account: / – 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, / – 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 does not in itself constitute a relationship of contribution. The activity in question should substantially increase the risk of adverse impact;

RemovedArticle 3 – paragraph 1 – point q d (new): (qd) being ‘directly linked to an adverse impact’ means that there is a relationship between the adverse impact and the company’s products, services or operations through another business relationship and where the company has neither caused nor contributed to the impact. Directly linked is not defined by a direct business relationship. Also, a direct linkage does not imply that the responsibility shifts from the business relationship causing an adverse impact to the company with which it has a linkage;

RemovedArticle 3 – paragraph 1 – point q e (new): (qe) ‘risk-based’ means proportionate to the likelihood and severity of potential adverse impacts;

RemovedArticle 3 – paragraph 1 – point q f (new): (qf) ‘risk factors’ means company-level risk factors, business model risk factors, geographic risk factors, product and service risk factors and sectoral risk factors;

RemovedArticle 3 – paragraph 1 – point q g (new): (qg) ‘severity of an adverse impact’ means 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.

RemovedArticle 3 – paragraph 1 a (new): 1a. The Commission shall be empowered to adopt delegated acts in accordance with Article 28 to amend the Annex, in order to make sure that it remains consistent with the Union’s objectives on human rights and the environment.

RemovedArticle 3 a (new): Article 3a / Single market clause / 1. The Commission and the Member States shall coordinate during the transposition of this Directive and thereafter in view of a full level of harmonisation between Member States, in order to ensure a level playing field for companies and to prevent the fragmentation of the Single Market. / 2. The Commission shall consider, six years after the entry into force of this Directive, whether changes to the level of harmonisation of this Directive are required to ensure a level-playing field for companies in the Single Market, including whether the provisions of this Directive could be converted into a Regulation.

RemovedArticle 4 – paragraph 1 – introductory part: 1. Member States shall ensure that companies conduct risk-based human rights and environmental due diligence as laid down in Articles 5 to 11 (‘due diligence’) by carrying out the following actions:

RemovedArticle 4 – paragraph 1 – point c a (new): (ca) where necessary, prioritising potential and actual adverse impacts in accordance with Article 8b;

RemovedArticle 4 – paragraph 1 – point c b (new): (cb) remedying actual adverse impacts in accordance with Article 8c;

RemovedArticle 4 – paragraph 1 – point d: (d) establishing or participating in a notification and non-judicial grievance mechanism in accordance with Article 9;

RemovedArticle 4 – paragraph 1 – point e: (e) monitoring and verifying the effectiveness of their due diligence policy and measures in accordance with Article 10;

RemovedArticle 4 – paragraph 1 – point f a (new): (fa) consulting and engaging with affected stakeholders in a meaningful way in accordance with Article 8d.

RemovedArticle 4 – paragraph 2 a (new): 2a. Companies shall retain documentation demonstrating their compliance with this Directive for at least 10 years.

RemovedArticle 4 a (new): Article 4a / Due diligence support at group level / 1. Member States shall ensure that parent companies may perform actions which can contribute to their subsidiaries falling under the scope of this Directive meet their obligations set out in Articles 5 to 11 and Article 15. This is without prejudice to the civil liability of subsidiaries in accordance with Article 22. / 2. The parent company may perform actions which contribute to fulfilling the due diligence obligations by the subsidiary company in accordance with paragraph 1, subject to all the following conditions: / (a) the subsidiary provides all the relevant and necessary information to its parent company and cooperates with it; / (b) the subsidiary abides by its parent company's due diligence policy; / (c) the parent company accordingly adapts its due diligence policy to ensure that the obligations laid down in Article 5(1) are fulfilled with respect to the subsidiary; / (d) the subsidiary integrates due diligence into all its policies and risk management systems in accordance with Article 5; / (e) 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; / (f) 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; / (g) the subsidiary i…

RemovedArticle 5 – paragraph 1 – introductory part: 1. Member States shall ensure that companies integrate due diligence into their relevant corporate policies and have in place a due diligence policy. The due diligence policy shall contain all of the following:

RemovedArticle 5 – paragraph 1 – point -a (new): (-a) a description of the potential or actual adverse impacts identified by the company in line with Article 6;

RemovedArticle 5 – paragraph 1 – point a: (a) a description of the company’s approach to due diligence, including in the short, medium and long term;

RemovedArticle 5 – paragraph 1 – point b: (b) a code of conduct defining rules and principles and measures to be followed and implemented where relevant throughout the company and its subsidiaries across all operations. The code of conduct shall be designed to ensure that the company respects human rights and the environment, and it shall be aligned with the fundamental values of the Union;

RemovedArticle 5 – paragraph 1 – point c: (c) 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.

RemovedArticle 5 – paragraph 2: 2. Member States shall ensure that the companies continuously review their due diligence policy and update it when significant changes occur.

RemovedArticle 5 – paragraph 2 a (new): 2a. Companies shall carry out a due diligence policy which is proportionate and commensurate to the likelihood and severity of their potential adverse impacts and the severity of their actual adverse impacts, as well as their specific circumstances and risk factors, particularly their sector and location of activity, the size and length of their value chain, the size of the company, its capacity, resources and leverage.

RemovedArticle 5 – paragraph 2 b (new): 2b. When companies operate in areas in a state of armed conflict or fragile post-conflict, areas under occupation and/or annexation, as well as areas witnessing weak or non-existent governance and security, such as failed states, Member States shall ensure that they respect obligations under international humanitarian law and conduct heightened, conflict-sensitive due diligence on their operations and business relations through integrating into their due diligence, a conflict analysis based on meaningful and conflict-sensitive stakeholders’ engagement, of the root causes, triggers and parties driving the conflict, and of the impact of the company’s activities on the conflict.

RemovedArticle 6 – title: Identifying and assessing actual and potential adverse impacts

RemovedArticle 6 – paragraph 1: 1. Member States shall ensure that companies take appropriate measures to broadly scope the impacts of their operations, subsidiaries and business relationships in order to identify and assess actual and potential adverse human rights and environmental impacts arising from their own operations, products and services or those of their subsidiaries and those related to their value chains, and whether they cause or contribute to or are directly linked to those impacts.

RemovedArticle 6 – paragraph 2: 2. Member States shall ensure that, as part of their due diligence process, companies shall: / (a) identify where adverse impacts are most likely to occur and to be severe, including by identifying individual higher risk operations, subsidiaries and business relationships which should be prioritised taking into account relevant risk factors; and / (b) carry out in-depth assessments of prioritised operations, subsidiaries and business relationships in order to determine the nature and extent of specific actual and potential adverse impacts.

RemovedArticle 6 – paragraph 2 a (new): 2 a. In identifying individual higher risk business relationships, relevant company-level risk factors shall include whether the business relationship is a company covered by this Directive.

RemovedArticle 6 – paragraph 3: 3. When companies referred to in Article 3, point (a)(iv), provide financial services, identification of actual and potential adverse human rights impacts and adverse environmental impacts shall be carried out before providing that service and before subsequent financial operations, and, if notified of possible risks by means of the procedures referred to in Article 9, during the provision of the service.

RemovedArticle 6 – paragraph 4: 4. Member States shall ensure that, for the purposes of identifying and assessing adverse impacts based on, where appropriate, quantitative and qualitative information, including the relevant disaggregated data that can be reasonably obtained by a company, companies shall make use of appropriate methods and resources, including public reports, independent reports and information gathered through the notification and non-judicial grievance mechanism provided for in Article 9. Companies shall also carry out meaningful engagement in accordance with Article 8d with potentially affected stakeholders including workers and other relevant stakeholders to gather information on as well as to identify and assess actual or potential adverse impacts.

RemovedArticle 6 – paragraph 4 a (new): 4a. In the event that not all the necessary information regarding its value chain is available, the company shall explain the efforts made to obtain the necessary information about its value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future.

RemovedArticle 7 – paragraph 1: 1. Member States shall ensure that companies take appropriate measures to prevent, or where prevention is not possible or not immediately possible or has failed, adequately mitigate potential adverse human rights impacts and adverse environmental impacts, that have been, or should have been, identified pursuant to Article 6, in accordance with this Article.