Which business activities are covered by the due diligence duty?

To foster sustainable and responsible corporate behaviour, and advance the sustainability transition, it is necessary to cover global ‘chains of activities’ where most adverse human rights and environmental impacts occur.

• Under the Directive, the concept of “chain of activities” covers both upstream and downstream activities:
• – The activities of upstream business partners related to the production of goods or the provision of services by the company, including the design, extraction, sourcing, manufacture, transport, storage and supply of raw materials, products or parts of products and the development of the product or the service. For a car manufacturer, a direct upstream business partner might be a tyre producer, an indirect upstream business partner might be a producer of rubber that is used in the production of those tyres
• – The activities of downstream business partners related to the distribution, transport and storage of the product, where the business partner carries out those activities “for the company or on behalf of the company”. Using a clothing manufacturer example, a downstream business partner might be a retail store that sells the finished clothing products to consumers. As regards the impacts of the products or services through their use, companies in scope are required to identify adverse impacts linked to their own operations, and make the necessary modifications to their business plan, overall strategies and operations, including the design of products/services, purchasing and distribution practices.

The coverage of the Directive stems from the nature of due diligence as a corporate risk and impact management tool that must be integrated into a company’s policies and risk management systems. It is not limited to a specific product or service and does not depend on where the company operates or where its business partners are located. This is consistent with the approach taken by authoritative international due diligence instruments such as the OECD Guidelines or the UNGPs.