On 23 February 2022, the European Commission published its much-anticipated draft corporate sustainability and due diligence directive (the “Draft Directive”). The Draft Directive sets out a proposed EU standard for human rights and environmental due diligence (“HREDD”) which, importantly, would apply to any non-EU-based company and its subsidiaries if those group companies have aggregate annual net turnover in the EU of:
- more than EUR 150 million (Group 1); or
- more than EUR 40 million with at least 50% of net worldwide turnover generated in a “high-risk” sector which includes textiles, clothing and footwear, agriculture, forestry, fisheries, food & extractives (Group 2).
Notably, the HREDD applies even if a company and its subsidiaries do not have a physical presence in the EU, if the above net turnover threshold is met.
The Draft Directive requires both Group 1 and Group 2 companies to take appropriate measures to identify, and mitigate, actual and potential adverse human rights and environmental impacts arising from their own operations anywhere in the world (not just in the EU) and, where related to their value chains, from their “established business relationships”.
Colleagues from our offices throughout the world have prepared briefings which are specific to particular locations, giving insights into related matters in those jurisdictions.