2027: The Deadline for Your Company. Are You Ready for the New Era of Corporate Responsibility?

The Due Diligence Directive imposes a series of obligations on companies to ensure that they respect human rights and the environment throughout their value chains.

According to the timeline set out in Directive (EU) 2024/1760, companies will have different principal obligations depending on their size and implementation date. The following details these obligations:

General Obligations for All Affected Companies

• Integration of Due Diligence: All companies must integrate due diligence into their policies and risk management systems, adopting a risk-based due diligence policy. This includes describing the company’s approach, a code of conduct, and processes to integrate due diligence. The policy must be reviewed and updated at least every 24 months, or sooner if there is a significant change.
• Detection and Assessment of Adverse Impacts: Companies must detect and assess the actual and potential adverse impacts of their own operations, those of their subsidiaries, and those of their business partners in their value chains. This must be done using quantitative and qualitative information.
• Prioritization of Adverse Impacts: If it is not possible to address all adverse impacts simultaneously, companies must prioritize those that are most severe and likely.
• Prevention and Mitigation of Adverse Impacts: Companies must adopt appropriate measures to prevent or mitigate potential adverse impacts, including developing action plans, obtaining contractual assurances from business partners, making investments, and adapting their practices.
• Elimination and Minimization of Adverse Impacts: In the event of actual adverse impacts, companies must take measures to eliminate them or, when not possible, minimize their extent. This may include developing corrective action plans and obtaining contractual assurances from business partners.
• Collaboration with Stakeholders: Companies must collaborate with stakeholders throughout the due diligence process, including employees and representatives, trade unions, non-governmental organizations, and experts when necessary. They must establish mechanisms for submitting complaints and notifications, ensuring that participants are not subject to reprisals.
• Monitoring: Companies must conduct periodic evaluations of their operations and measures to ensure the effectiveness of activities to detect, prevent, and mitigate adverse impacts.
• Communication: Companies must publish an annual statement on their due diligence policies, processes, and activities.
• Documentation Retention: Companies must retain documentation related to the measures taken to comply with their obligations for at least five years.

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Specific Obligations by Implementation Phase

• July 26, 2027 (Large Companies):

  • Companies with more than 5,000 employees and a global net turnover exceeding 1.5 billion EUR in the last financial year prior to July 26, 2027, must comply with the due diligence obligations set out in Articles 7 to 16 and Article 22.
  • These companies must also comply with the obligation to adopt a transition plan for climate change mitigation.
  • The reporting obligation under Article 16 begins in financial years starting from January 1, 2028.
  • Third-country companies with a net turnover exceeding 1.5 billion EUR in the Union must also comply with these obligations.

• July 26, 2028 (Medium-Sized Companies):

  • Companies with more than 3,000 employees and a global net turnover exceeding 900 million EUR in the last financial year prior to July 26, 2028, must comply with the due diligence obligations.
  • The reporting obligation under Article 16 begins in financial years starting from January 1, 2029.
  • Third-country companies with a net turnover exceeding 900 million EUR in the Union must also comply with these obligations.

• July 26, 2029 (All Other Companies):

  • All other companies within the scope of the directive must comply with the due diligence obligations.
  • The reporting obligation under Article 16 begins in financial years starting from January 1, 2029.

Additional Obligations

• Climate Change Mitigation Transition Plan: Companies must adopt a transition plan for climate change mitigation, including quantifiable targets for 2030 and 2050 based on scientific data, as well as measures for their implementation.
• Authorized Representative (Third-Country Companies): Third-country companies must designate an authorized representative in the Union and must notify the supervisory authorities of their compliance with the directive’s requirements.

Key Points

• Model Contract Clauses: The European Commission must adopt guidelines on voluntary model contract clauses by January 26, 2027, to help companies ensure compliance by their business partners.
• Civil Liability: Companies may be held civilly liable for damages and losses caused to persons or entities if they fail to comply with their due diligence obligations, particularly if they have not prevented or mitigated adverse impacts.

Below is a video we have prepared on the subject:

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