Risk Analysis and Risk Management

This Directive establishes a corporate due diligence duty. The core elements of this duty are identifying, bringing to an end, preventing, mitigating and accounting for negative human rights and environmental impacts in the company’s own operations, their subsidiaries and their value chains.

The rules on corporate sustainability due diligence will be enforced through:

Administrative supervision: Member States will designate an authority to supervise and impose effective, proportionate and dissuasive sanctions, including fines and compliance orders. At European level, the Commission will set up a European Network of Supervisory Authorities that will bring together representatives of the national bodies to ensure a coordinated approach.

Civil liability: Member States will ensure that victims get compensation for damages resulting from the failure to comply with the obligations of the new proposals.

The Directive imposes a risk assessment focus on value chains and requires companies to take action where needed as it mandates them to identify, mitigate and remedy negative impacts.

To follow these steps, companies must know and work with business partners in its supply chain that pose sustainability risks, including indirect suppliers further up the chain.

Risk Analysis

Companies need to conduct an active risk assessment across their entire supplier base, highlighting potential environmental, ethical and human rights impacts, and investigate areas of concern.

Concrete Action plan to mitigate identified risk

If actual or potential impacts are identified companies must create an action plan to collaboratively work with their partners to address risks and improve performance.

Due Diligence reporting

Companies have to publicly report on the impact of their operations and supply chains on human rights and the environment as well as their due diligence policy via sustainability report or website.