4.2 Agreement on mutual contractual responsibilities

Article 8, Identifying and assessing actual and potential adverse impacts.

8.1. Member States shall ensure that companies take appropriate measures to identify and assess actual and potential adverse impacts arising from their own operations or those of their subsidiaries and, where related to their chains of activities, those of their business partners, in accordance with this Article.

8.2. As part of the obligation set out in paragraph 1, taking into account relevant risk factors, companies shall take appropriate measures to:

(a) map their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in order to identify general areas where adverse impacts are most likely to occur and to be most severe; (b) based on the results of the mapping as referred to in point (a), carry out an in-depth assessment of their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners, in the areas where adverse impacts were identified to be most likely to occur and most severe.

Article 9, Prioritisation of identified actual and potential adverse impacts.

9.1. Member States shall ensure that, where it is not feasible to prevent, mitigate, bring to an end or minimise all identified adverse impacts at the same time and to their full extent, companies prioritise adverse impacts identified pursuant to Article 8 in order to fulfil the obligations laid down in Article 10 or 11.

Article 10, Preventing potential adverse impacts.

10.1 Member States shall ensure that companies take appropriate measures to prevent, or where prevention is not possible or not immediately possible, adequately mitigate, potential adverse impacts that have been, or should have been, identified pursuant to Article 8, in accordance with Article 9 and with this Article.

To determine the appropriate measures referred to in the first subparagraph, due account shall be taken of:

(a) whether the potential adverse impact may be caused only by the company; whether it may be caused jointly by the company and a subsidiary or business partner, through acts or omissions; or whether it may be caused only by a company’s business partner in the chain of activities; (b) whether the potential adverse impact may occur in the operations of a subsidiary, direct business partner or indirect business partner; and (c) the ability of the company to influence the business partner that may cause or jointly cause the potential adverse impact.

Article 10.2 Companies shall be required to take the following appropriate measures, where relevant:

(b) seek contractual assurances from a direct business partner that it will ensure compliance with the company’s code of conduct and, as necessary, a prevention action plan, including by establishing corresponding contractual assurances from its partners, to the extent that their activities are part of the company’s chain of activities; when such contractual assurances are obtained, paragraph 5 shall apply;

Article 11, Bringing actual adverse impacts to an end

11.1 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 8 to an end, in accordance with Article 9 and with this Article.

To determine the appropriate measures referred to in the first subparagraph, due account shall be taken of:

(a) whether the actual adverse impact is caused only by the company; whether it is caused jointly by the company and a subsidiary or business partner, through acts or omissions; or whether it is caused only by a company’s business partner in the chain of activities; (b) whether the actual adverse impact occurred in the operations of a subsidiary, direct business partner or indirect business partner; and (c) the ability of the company to influence the business partner that caused or jointly caused the actual adverse impact.

Article 11.3 Companies shall be required to take the following appropriate measures, where relevant:

(c) seek contractual assurances from a direct business partner that it will ensure compliance with the company’s code of conduct and, as necessary, a corrective action plan, including by establishing corresponding contractual assurances from its partners, to the extent that their activities are part of the company’s chain of activities; when such contractual assurances are obtained, paragraph 6 shall apply; (f): provide targeted and proportionate support to an SME which is a business partner of the company, where necessary in light of the resources, knowledge and constraints of the SME, including by providing or enabling access to capacity-building, training or upgrading management systems, and, where compliance with the code of conduct or the corrective action plan would jeopardise the viability of the SME, by providing targeted and proportionate financial support, such as direct financing, low-interest loans, guarantees of continued sourcing, or assistance in securing financing;

Article 11.5: As regards actual adverse impacts that could not be brought to an end or the extent of which could not be adequately minimised by the appropriate measures listed in paragraph 11.3, the company may seek contractual assurances from an indirect business partner, with a view to achieving compliance with the company’s code of conduct or a corrective action plan. When such contractual assurances are obtained, paragraph 6 shall apply.

Article 13, Meaningful engagement with stakeholders.

13.1. Member States shall ensure that companies take appropriate measures to carry out effective engagement with stakeholders, in accordance with this Article.

13.3. Consultation of stakeholders shall take place at the following stages of the due diligence process:

(b) when developing prevention and corrective action plans pursuant to Article 10(2) and Article 11(3), and developing enhanced prevention and corrective action plans pursuant to Article 10(6) and Article 11(7); (c) when deciding to terminate or suspend a business relationship pursuant to Article 10(6) and Article 11(7);

Recital 39

In order to ensure that due diligence forms part of companies’ policies and risk management systems, and in line with the relevant international framework, companies should integrate due diligence into their relevant policies and risk management systems and at all relevant levels of operation, and have in place a due diligence policy. The due diligence policy should be developed in prior consultation with the company’s employees and their representatives and should contain a description of the company’s approach, including in the long term, to due diligence, a code of conduct describing the rules and principles to be followed throughout the company and its subsidiaries, and, where relevant, the company’s direct or indirect business partners and a description of the processes put in place to integrate due diligence into the relevant policies and to carry out due diligence, including the measures taken to verify compliance with the code of conduct and to extend its application to business partners. The due diligence policy should ensure a risk-based due diligence. The code of conduct should apply in all relevant corporate functions and operations, including procurement, employment and purchasing decisions. For the purposes of this Directive, employees should be understood as including temporary agency workers, and other workers in non-standard forms of employment provided that they fulfil the criteria for determining the status of worker established by the CJEU.

Recital 46 
 

Companies should seek to obtain contractual assurances from a direct business partner that it will ensure compliance with the code of conduct and, as necessary, the prevention action plan, including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the chains of activities of the companies.

Contractual assurances should be designed to ensure that responsibilities are shared appropriately by the company and the business partners.

The contractual assurances should be accompanied by appropriate measures to verify compliance. However, the company should only be obliged to seek the contractual assurances, as obtaining them may depend on the circumstances. To ensure comprehensive prevention of potential adverse impacts, companies should also make financial or non-financial investments, adjustments or upgrades which aim to prevent adverse impacts, and collaborate with other companies, in compliance with Union law.

Companies should also provide targeted and proportionate support for a small and medium-sized enterprise (SME) which is a business partner of the company, where necessary in light of the resources, knowledge and constraints of the SME, including by providing or enabling access to capacity-building, training or upgrading management systems, and, where compliance with the code of conduct or the prevention action plan would jeopardise the viability of the SME, providing targeted and proportionate financial support, such as direct financing, low-interest loans, guarantees of continued sourcing, or assistance in securing financing. The notion of ‘jeopardising the viability of an SME’ should be interpreted as possibly causing a bankruptcy of the SME or putting the SME in a situation where bankruptcy is imminent.

Recital 54 
 

Companies should seek to obtain contractual assurances from a direct business partner that it will ensure compliance with the code of conduct and, as necessary, the corrective action plan, including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the chains of activities of the companies.

Contractual assurances should be designed to ensure that responsibilities are shared appropriately by the company and the business partners. The contractual assurances should be accompanied by appropriate measures to verify compliance. However, the company should only be obliged to seek the contractual assurances, as obtaining them may depend on the circumstances.

Recital 55
 

In order to reflect the full range of options for the company in cases where actual adverse impacts could not be addressed by the described measures, this Directive should also refer to the possibility for the company to seek contractual assurances with the indirect business partner, with a view to achieving compliance with the company’s code of conduct or a corrective action plan, and conduct appropriate measures to verify compliance of the indirect business partner with the contractual assurances.

Recital 56 
 

When contractual assurances are obtained from an SME that is an indirect business partner, companies should assess whether the contractual assurances should be accompanied by appropriate measures for SMEs. When the SME requests to pay part of the cost, or in agreement with the company, the SME should be able to share the results of verification with other companies.

Recital 66
 

In order to give companies tools to help them comply with their due diligence requirements through their chains of activities, the Commission, in consultation with Member States and stakeholders, should provide guidance on model contractual clauses, which can be used voluntarily by companies as a tool to help fulfil their obligations in Articles 10 and 11.

The guidance should aim to facilitate a clear allocation of tasks between contracting parties and ongoing cooperation, in a way that avoids the transfer of the obligations provided for in this Directive to a business partner and automatically rendering the contract void in case of a breach. The guidance should reflect the principle that the mere use of contractual assurances cannot, on its own, satisfy the due diligence standards provided for in this Directive.