On November 30, 2022, the European Council released its proposal for a Directive on human rights and environmental due diligence based on the proposal submitted in February by the European Commission. While providing clarifications on important elements such as prioritisation of impacts, the Council’s draft misses the opportunity to set ambitious due diligence as it removes several key aspects such as directors’ duty of care.

Key takeaways:

• The whole concept of business relationship was abandoned. Instead, only the ‘business partner’ is used.
• The term ‘value chain’ was replaced by ‘chain of activities’, leaving out the phase of the use of the company’s products or provision of services entirely (downstream).
• The risk-based approach was strengthened through the introduction of an article on prioritisation of adverse impacts.
• The inclusion of the provision of financial services within the scope of the Directive is left to the appreciation of Member States
• The provision linking the variable remuneration of directors to their contribution to the company’s business strategy and long-term interest and sustainability was deleted.
• The provisions on directors’ duty were deleted.

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