The European Commission ("Commission") issued a Proposal for a Directive on Corporate Sustainability Due Diligence to tackle human rights and environmental impacts across global value chains ("the Proposed Directive") on 23 February 2022. The Proposed Directive would impose a corporate due diligence duty on large EU and third-country companies, and smaller companies in certain "high-risk" sectors, to identify and take steps to remedy actual and prevent or mitigate potential adverse impacts on human rights and the environment in the companies' own operations, and their subsidiaries and value chains. With this regard this new Proposed Directive will affect third country as under Article 2.2 of the Proposed Regulation. It is of the importance of third party companies including Turkish companies within the scope of the Proposed Regulation and it is worth summarizing the Proposed Directive.

What does this new Proposed Directive bring?

Under the Paragraph 16 of the Proposed Directive, the due diligence process set out in this Directive should cover the six steps defined by the OECD Due Diligence Guidance for Responsible Business Conduct, which include due diligence measures for companies to identify and address adverse human rights and environmental impacts. This encompasses the following steps: (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimising actual and potential adverse human rights, and environmental impacts, (4) assessing the effectiveness of measures, (5) communicating, (6) providing remediation.

Under the due diligence obligations set out by this Directive, if a company identifies potential adverse human rights or environmental impacts, it should take appropriate measures to prevent and adequately mitigate them. To provide companies with legal clarity and certainty, this Directive should set out the actions companies should be expected to take for prevention and mitigation of potential adverse impacts where relevant depending on the circumstances

Which are the thresholds to be met for companies located abroad?

This Directive shall also apply to companies which are formed in accordance with the legislation of a third country, and fulfill one of the following conditions: (a) generated a net turnover of more than EUR 150 million in the Union in the financial year preceding the last financial year; (b) generated a net turnover of more than EUR 40 million but not more than EUR 150 million in the Union in the financial year preceding the last financial year, provided that at least 50% of its net worldwide turnover was generated in one or more of the sectors listed in paragraph 1, point (b).

These sectors are manufacture of textiles, leather and related products (including footwear), and the wholesale trade of textiles, clothing and footwear; EN 47 EN (ii) agriculture, forestry, fisheries (including aquaculture), the manufacture of food products, and the wholesale trade of agricultural raw materials, live animals, wood, food, and beverages; (iii) the extraction of mineral resources regardless from where they are extracted (including crude petroleum, natural gas, coal, lignite, metals and metal ores, as well as all other, non-metallic minerals and quarry products), the manufacture of basic metal products, other non-metallic mineral products and fabricated metal products (except machinery and equipment), and the wholesale trade of mineral resources, basic and intermediate mineral products (including metals and metal ores, construction materials, fuels, chemicals and other intermediate products).

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