### (20) in order to allow companies to properly identify the adverse impacts in their value chain and to make it possible for them to exercise appropriate leverage , the due diligence obligations should be limited in this directive to established business relationships. for the purpose of this directive , established business relationships should mean such direct and indirect business relationships which are , or which are expected to be lasting , in view of their intensity and duration and which do not represent a negligible or ancillary part of the value chain. the nature of business relationships as “established” should be reassessed periodically , and at least every 12 months. if the direct business relationship of a company is established , then all linked indirect business relationships should also be considered as established regarding that company. ### (20) in order to allow companies to properly identify and prioritise the adverse impacts in their supply chain based on a risk assessment and risk-based monitoring and to make it possible for them to exercise appropriate leverage , the due diligence obligations should be limited in this directive to direct business relationships. for the purpose of this directive , business relationships should mean such direct contractual relationship with a contractor , subcontractor or any other legal entities from a third country that are necessary for the supply of goods or the provision of services that are necessary for the production of the companies' product or the provision of and use of the relevant service , that does not represent a negligible or merely ancillary part of the supply chain.


### (20) in order to allow companies to properly identify the adverse impacts in their value chain and to make it possible for them to exercise appropriate leverage , the due diligence obligations should be limited in this directive to established business relationships. for the purpose of this directive , established business relationships should mean such direct and indirect business relationships which are , or which are expected to be lasting , in view of their intensity and duration and which do not represent a negligible or ancillary part of the value chain. the nature of business relationships as “established” should be reassessed periodically , and at least every 12 months. if the direct business relationship of a company is established , then all linked indirect business relationships should also be considered as established regarding that company. ### (20) in order to allow companies to properly identify the adverse impacts in their value chain and to make it possible for them to exercise appropriate leverage , the due diligence obligations in this directive should cover business relationships. for the purpose of this directive , business relationships should mean business relationships which are relevant based on the risk and severity of adverse impacts associated therewith.


### (20) in order to allow companies to properly identify the adverse impacts in their value chain and to make it possible for them to exercise appropriate leverage , the due diligence obligations should be limited in this directive to established business relationships. for the purpose of this directive , established business relationships should mean such direct and indirect business relationships which are , or which are expected to be lasting , in view of their intensity and duration and which do not represent a negligible or ancillary part of the value chain. the nature of business relationships as “established” should be reassessed periodically , and at least every 12 months. if the direct business relationship of a company is established , then all linked indirect business relationships should also be considered as established regarding that company. ### (20) in order to allow companies to properly identify and prioritise the adverse impacts in their supply chain based on a risk assessment and risk-based monitoring and to make it possible for them to exercise appropriate leverage , the due diligence obligations should be limited in this directive to direct business relationships. for the purpose of this directive , business relationships should mean such direct contractual relationship with a contractor , subcontractor or any other legal entities from a third country that are necessary for the supply of goods or the provision of services that are necessary for the production of the companies' product or the provision of and use of the relevant service , with whom the company has a commercial agreement , and that does not represent a negligible or merely ancillary part of the supply chain.


### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company. ### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors or one or more high-risk geographical areas , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors or high-risk geographical areas should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company.


### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company. ### (21) under this directive , companies established in the union with more than 3000 employees on average and a worldwide net turnover exceeding eur 900 million in the financial year preceding the last financial year should be required to comply with due diligence. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company.


### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company. ### (21) under this directive , eu companies with more than 5000 employees on average and a worldwide net turnover exceeding eur 900 million in the financial year preceding the last financial year should be required to comply with due diligence. companies which do not fulfil those criteria , but which had more than 3000 employees on average and more than eur 150 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 5 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company.


### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company. ### (21) under this directive , eu companies with more than 5000 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company.


### (21) under this directive , eu companies with more than 500 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. as regards companies which do not fulfil those criteria , but which had more than 250 employees on average and more than eur 40 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company. ### (21) under this directive , eu companies with more than 5000 employees on average and a worldwide net turnover exceeding eur 150 million in the financial year preceding the last financial year should be required to comply with due diligence. companies which do not fulfil those criteria , but which had more than 3000 employees on average and more than eur 50 million worldwide net turnover in the financial year preceding the last financial year and which operate in one or more high-impact sectors , due diligence should apply 2 years after the end of the transposition period of this directive , in order to provide for a longer adaptation period. in order to ensure a proportionate burden , companies operating in such high-impact sectors should be required to comply with more targeted due diligence focusing on severe adverse impacts. temporary agency workers , including those posted under article 1(3) , point (c) , of directive 96/71/ec , as amended by directive 2018/957/eu of the european parliament and of the council103 , should be included in the calculation of the number of employees in the user company. posted workers under article 1(3) , points (a) and (b) , of directive 96/71/ec , as amended by directive 2018/957/eu , should only be included in the calculation of the number of employees of the sending company.


### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , even if it is covered by sector-specific oecd guidance , it should not form part of the high-impact sectors covered by this directive. at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability. ### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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 , with special emphasizes paid to endocrine disruptors). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , even if it is covered by sector-specific oecd guidance , it should not form part of the high-impact sectors covered by this directive. at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability.


### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , even if it is covered by sector-specific oecd guidance , it should not form part of the high-impact sectors covered by this directive. at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability. ### deleted


### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , even if it is covered by sector-specific oecd guidance , it should not form part of the high-impact sectors covered by this directive. at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability. ### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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).


### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , even if it is covered by sector-specific oecd guidance , it should not form part of the high-impact sectors covered by this directive. at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability. ### (22) in order to reflect the priority areas of international action aimed at tackling human rights and environmental issues , the selection of high-impact sectors for the purposes of this directive should be based on existing sectoral oecd due diligence guidance. the following sectors should be regarded as high-impact for the purposes of this directive: the manufacture of textiles , leather and related products (including footwear) , and the wholesale trade of textiles , clothing and footwear; agriculture , forestry , fisheries (including aquaculture) , the manufacture of food products , and the wholesale trade of agricultural raw materials , live animals , wood , food , and beverages; the extraction of mineral resources regardless of where they are extracted from (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). as regards the financial sector , due to its specificities , in particular as regards the value chain and the services offered , the commission should be empowered to draft sector-specific guidelines in line with the oecd guidance , to ensure that the sector can properly adhere to the requirements in this directive. . at the same time , in this sector , the broader coverage of actual and potential adverse impacts should be ensured by also including very large companies in the scope that are regulated financial undertakings , even if they do not have a legal form with limited liability.


### (23) in order to achieve fully the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and value chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which generated a net turnover of at least eur 150 million in the union in the financial year preceding the last financial year or a net turnover of more than eur 40 million but less than eur 150 million in the financial year preceding the last financial year in one or more of the high-impact sectors , as of 2 years after the end of the transposition period of this directive. ### (23) in order to fully achieve the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and supply chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which have a branch or subsidiary in the eu , had 3000 employees on average and generated a net worldwide turnover of at least eur 900 million in the last financial year.


### (23) in order to achieve fully the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and value chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which generated a net turnover of at least eur 150 million in the union in the financial year preceding the last financial year or a net turnover of more than eur 40 million but less than eur 150 million in the financial year preceding the last financial year in one or more of the high-impact sectors , as of 2 years after the end of the transposition period of this directive. ### (23) in order to achieve fully the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and supply chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which generated a net worldwide turnover of at least eur 150 million in the financial year preceding the last financial year of which at least eur 50 million was generated in the union or a net turnover of more than eur 40 million but less than eur 150 million of which at least eur 50 million was generated in the union in the financial year preceding the last financial year in one or more of the high-impact sectors , as of 2 years after the end of the transposition period of this directive. this directive should also apply to those companies which do not meet the criteria mentioned above if that company is part of a group of companies whose parent company is registered in a third country and which has more than 5000 employees on average or had a net worldwide turnover of more than eur 150 million in the last financial year for which annual financial statements have been prepared. a group of companies refers to a parent company and all its subsidiaries.


### (23) in order to achieve fully the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and value chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which generated a net turnover of at least eur 150 million in the union in the financial year preceding the last financial year or a net turnover of more than eur 40 million but less than eur 150 million in the financial year preceding the last financial year in one or more of the high-impact sectors , as of 2 years after the end of the transposition period of this directive. ### (23) in order to achieve fully the objectives of this directive addressing human rights and adverse environmental impacts with respect to companies’ operations , subsidiaries and value chains , third-country companies with significant operations in the eu should also be covered. more specifically , the directive should apply to third-country companies which generated a net turnover of at least eur 150 million in the union in the financial year preceding the last financial year.


### (24) for defining the scope of application in relation to non-eu companies the described turnover criterion should be chosen as it creates a territorial connection between the third-country companies and the union territory. turnover is a proxy for the effects that the activities of those companies could have on the internal market. in accordance with international law , such effects justify the application of union law to third-country companies. to ensure identification of the relevant turnover of companies concerned , the methods for calculating net turnover for non-eu companies as laid down in directive (eu) 2013/34 as amended by directive (eu) 2021/2101 should be used. to ensure effective enforcement of this directive , an employee threshold should , in turn , not be applied to determine which third-country companies fall under this directive , as the notion of “employees” retained for the purposes of this directive is based on union law and could not be easily transposed outside of the union. in the absence of a clear and consistent methodology , including in accounting frameworks , to determine the employees of third-country companies , such employee threshold would therefore create legal uncertainty and would be difficult to apply for supervisory authorities. the definition of turnover should be based on directive 2013/34/eu which has already established the methods for calculating net turnover for non-union companies , as turnover and revenue definitions are similar in international accounting frameworks too. with a view to ensuring that the supervisory authority knows which third country companies generate the required turnover in the union to fall under the scope of this directive , this directive should require that a supervisory authority in the member state where the third country company’s authorised representative is domiciled or established and , where it is different , a supervisory authority in the member state in which the company generated most of its net turnover in the union in the financial year preceding the last financial year are informed that the company is a company falling under the scope of this directive. ### (24) for defining the scope of application in relation to third-country companies the company in question needs to have a branch or subsidiary in the eu as it creates a territorial connection between the third-country companies and the union territory. in addition , turnover is a proxy for the effects that the activities of those companies could have on the internal market. in accordance with international law , such effects justify the application of union law to third-country companies. to ensure identification of the relevant turnover of companies concerned , the methods for calculating net turnover for third-country companies as laid down in directive (eu) 2013/34 as amended by directive (eu) 2021/2101 should be used. to ensure effective enforcement of this directive , an employee threshold should also be applied as a benchmark to determine which third-country companies fall under this directive to create a level-playing field , while taking into account that the notion of “employees” retained for the purposes of this directive is based on union law and could not be easily transposed outside of the union. that is why the nexus to the eu needs to be ensured through having a branch or subsidiary in the eu. the definition of turnover should be based on directive 2013/34/eu which has already established the methods for calculating net turnover for non-union companies , as turnover and revenue definitions are similar in international accounting frameworks too. with a view to ensuring that the supervisory authority knows which third country companies generate the required turnover in the union to fall under the scope of this directive , this directive should require that a supervisory authority in the member state where the third country company’s authorised representative is domiciled or established and , where it is different , a supervisory authority in the member state in which the company generated most of its net turnover in the union in the financial year preceding the last financial year are informed that the company is a company falling under the scope of this directive.


### (24) for defining the scope of application in relation to non-eu companies the described turnover criterion should be chosen as it creates a territorial connection between the third-country companies and the union territory. turnover is a proxy for the effects that the activities of those companies could have on the internal market. in accordance with international law , such effects justify the application of union law to third-country companies. to ensure identification of the relevant turnover of companies concerned , the methods for calculating net turnover for non-eu companies as laid down in directive (eu) 2013/34 as amended by directive (eu) 2021/2101 should be used. to ensure effective enforcement of this directive , an employee threshold should , in turn , not be applied to determine which third-country companies fall under this directive , as the notion of “employees” retained for the purposes of this directive is based on union law and could not be easily transposed outside of the union. in the absence of a clear and consistent methodology , including in accounting frameworks , to determine the employees of third-country companies , such employee threshold would therefore create legal uncertainty and would be difficult to apply for supervisory authorities. the definition of turnover should be based on directive 2013/34/eu which has already established the methods for calculating net turnover for non-union companies , as turnover and revenue definitions are similar in international accounting frameworks too. with a view to ensuring that the supervisory authority knows which third country companies generate the required turnover in the union to fall under the scope of this directive , this directive should require that a supervisory authority in the member state where the third country company’s authorised representative is domiciled or established and , where it is different , a supervisory authority in the member state in which the company generated most of its net turnover in the union in the financial year preceding the last financial year are informed that the company is a company falling under the scope of this directive. ### (24) for defining the scope of application in relation to non-eu companies the described turnover criterion should be chosen as it creates a territorial connection between the third-country companies and the union territory. turnover is a proxy for the effects that the activities of those companies could have on the internal market. in accordance with international law , such effects justify the application of union law to third-country companies. to ensure identification of the relevant turnover of companies concerned , the methods for calculating net turnover for non-eu companies as laid down in directive (eu) 2013/34 as amended by directive (eu) 2021/2101 should be used. to ensure effective enforcement of this directive , an employee threshold should also be applied as a benchmark to determine which third-country companies fall under this directive to create a level-playing field , while taking into account that the notion of “employees” retained for the purposes of this directive is based on union law and could not be easily transposed outside of the union. in the absence of a clear and consistent methodology , including in accounting frameworks , to determine the employees of third-country companies , such employee threshold would therefore create legal uncertainty and would be difficult to apply for supervisory authorities. the definition of turnover should be based on directive 2013/34/eu which has already established the methods for calculating net turnover for non-union companies , as turnover and revenue definitions are similar in international accounting frameworks too. with a view to ensuring that the supervisory authority knows which third country companies generate the required turnover in the union to fall under the scope of this directive , this directive should require that a supervisory authority in the member state where the third country company’s authorised representative is domiciled or established and , where it is different , a supervisory authority in the member state in which the company generated most of its net turnover in the union in the financial year preceding the last financial year are informed that the company is a company falling under the scope of this directive.


### (25) in order to achieve a meaningful contribution to the sustainability transition , due diligence under this directive should be carried out with respect to adverse human rights impact on protected persons resulting from the violation of one of the rights and prohibitions as enshrined in the international conventions as listed in the annex to this directive. in order to ensure a comprehensive coverage of human rights , a violation of a prohibition or right not specifically listed in that annex which directly impairs a legal interest protected in those conventions should also form part of the adverse human rights impact covered by this directive , provided that the company concerned could have reasonably established the risk of such impairment and any appropriate measures to be taken in order to comply with the due diligence obligations under this directive , taking into account all relevant circumstances of their operations , such as the sector and operational context. due diligence should further encompass adverse environmental impacts resulting from the violation of one of the prohibitions and obligations pursuant to the international environmental conventions listed in the annex to this directive. ### (25) in order to achieve a meaningful contribution to the sustainability transition , due diligence under this directive should be carried out with respect to adverse human rights impact on protected persons resulting from the violation of one of the rights and prohibitions as enshrined in the oecd due diligence guidelines for multinational enterprises as clarified in the oecd guidance for responsible business conduct , as well as the un guiding principles for business and human rights. due diligence should further encompass adverse environmental impacts resulting from the violation of one of the prohibitions and obligations pursuant to the international environmental conventions listed in the oecd due diligence guidelines for multinational enterprises as clarified in the guidance for responsible business conduct as regards the environment.


### (25) in order to achieve a meaningful contribution to the sustainability transition , due diligence under this directive should be carried out with respect to adverse human rights impact on protected persons resulting from the violation of one of the rights and prohibitions as enshrined in the international conventions as listed in the annex to this directive. in order to ensure a comprehensive coverage of human rights , a violation of a prohibition or right not specifically listed in that annex which directly impairs a legal interest protected in those conventions should also form part of the adverse human rights impact covered by this directive , provided that the company concerned could have reasonably established the risk of such impairment and any appropriate measures to be taken in order to comply with the due diligence obligations under this directive , taking into account all relevant circumstances of their operations , such as the sector and operational context. due diligence should further encompass adverse environmental impacts resulting from the violation of one of the prohibitions and obligations pursuant to the international environmental conventions listed in the annex to this directive. ### (25) in order to achieve a meaningful contribution to the sustainability transition and , at the same time , to limit the regulatory and financial burden for companies under the scope of the directive , due diligence under this directive should be carried out with respect to adverse human rights impact and adverse environmental impacts resulting from the violation of one of the principles set out in the oecd due diligence guidance for responsible business conduct , the oecd guidelines for multinational enterprises and the un guiding principles on business and human rights as regards the environment or human rights.


### (27) in order to conduct appropriate human rights , and environmental due diligence with respect to their operations , their subsidiaries , and their value chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts , establish and maintain a complaints procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive. ### (27) in order to conduct appropriate human rights , and environmental due diligence with respect to their operations , their subsidiaries , and their supply chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts that they cause or contribute to , establish and maintain a notification procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence in line with competition law. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive.


### (27) in order to conduct appropriate human rights , and environmental due diligence with respect to their operations , their subsidiaries , and their value chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts , establish and maintain a complaints procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive. ### (27) in order to conduct appropriate human rights , children's rights and environmental due diligence with respect to their operations , their subsidiaries , and their value chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts , establish and maintain a complaints procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive.


### (27) in order to conduct appropriate human rights , and environmental due diligence with respect to their operations , their subsidiaries , and their value chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts , establish and maintain a complaints procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive. ### (27) in order to conduct appropriate human rights , and environmental due diligence with respect to their operations , their subsidiaries , and their value chains , companies covered by this directive should integrate due diligence into corporate policies , identify , prevent and mitigate as well as bring to an end and minimise the extent of potential and actual adverse human rights and environmental impacts , establish and maintain a notification procedure , monitor the effectiveness of the taken measures in accordance with the requirements that are set up in this directive and communicate publicly on their due diligence. in order to ensure clarity for companies , in particular the steps of preventing and mitigating potential adverse impacts and of bringing to an end , or when this is not possible , minimising actual adverse impacts should be clearly distinguished in this directive.


### (29) to comply with due diligence obligations , companies need to take appropriate measures with respect to identification , prevention and bringing to an end adverse impacts. an ‘appropriate measure’ should mean a measure that is capable of achieving the objectives of due diligence , commensurate with the degree of severity and the likelihood of the adverse impact , and reasonably available to the company , taking into account the circumstances of the specific case , including characteristics of the economic sector and of the specific business relationship and the company’s influence thereof , and the need to ensure prioritisation of action. in this context , in line with international frameworks , the company’s influence over a business relationship should include , on the one hand its ability to persuade the business relationship to take action to bring to an end or prevent adverse impacts (for example through ownership or factual control , market power , pre-qualification requirements , linking business incentives to human rights and environmental performance , etc.) and , on the other hand , the degree of influence or leverage that the company could reasonably exercise , for example through cooperation with the business partner in question or engagement with another company which is the direct business partner of the business relationship associated with adverse impact. ### (29) to comply with due diligence obligations , companies need to take appropriate measures with respect to identification , prevention and bringing to an end adverse impacts that it caused or contributed to. an ‘appropriate measure’ should mean a measure that is capable of achieving the objectives of due diligence , commensurate with the degree of severity and the likelihood of the adverse impact , and reasonably available to the company , taking into account the circumstances of the specific case , including characteristics of the economic sector and of the specific business relationship and the company’s influence thereof , and the need to ensure prioritisation of action. in this context , in line with international frameworks , the company’s leverage over a business relationship should include , on the one hand its ability to persuade the business relationship to take action to bring to an end or prevent adverse impacts (for example through ownership or factual control , market power , pre-qualification requirements , linking business incentives to human rights and environmental performance , etc.) and , on the other hand , the degree of influence or leverage that the company could reasonably exercise , for example through cooperation with the business partner in question or engagement with another company which is the direct business partner of the business relationship associated with adverse impact.


### (29) to comply with due diligence obligations , companies need to take appropriate measures with respect to identification , prevention and bringing to an end adverse impacts. an ‘appropriate measure’ should mean a measure that is capable of achieving the objectives of due diligence , commensurate with the degree of severity and the likelihood of the adverse impact , and reasonably available to the company , taking into account the circumstances of the specific case , including characteristics of the economic sector and of the specific business relationship and the company’s influence thereof , and the need to ensure prioritisation of action. in this context , in line with international frameworks , the company’s influence over a business relationship should include , on the one hand its ability to persuade the business relationship to take action to bring to an end or prevent adverse impacts (for example through ownership or factual control , market power , pre-qualification requirements , linking business incentives to human rights and environmental performance , etc.) and , on the other hand , the degree of influence or leverage that the company could reasonably exercise , for example through cooperation with the business partner in question or engagement with another company which is the direct business partner of the business relationship associated with adverse impact. ### (29) to comply with due diligence obligations , companies need to take appropriate measures with respect to identification , prevention and bringing to an end adverse impacts. an ‘appropriate measure’ should mean a measure that is capable of achieving the objectives of due diligence , commensurate with the degree of severity and the likelihood of the adverse impact , and reasonably available to the company , taking into account the circumstances of the specific case , including characteristics of the economic sector and of the specific business relationship and the company’s influence thereof , and the need to ensure prioritisation of action. in this context , in line with international frameworks , the company’s influence over a business relationship should include , on the one hand its ability to persuade the business relationship to take action to bring to an end or prevent adverse impacts (for example through ownership or factual control , market power , pre-qualification requirements , linking business incentives to human rights and environmental performance , etc.) and , on the other hand , the degree of influence or leverage that the company could reasonably exercise , for example through cooperation with the business partner in question or engagement with another company which is the direct business partner of the business relationship associated with adverse impact. severity means the scale , scope and irremediably character of the adverse impact , taking into account the gravity of the impact on the rights holder , the number of individuals that could be affected and the possibility of occurrence


### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. regulated financial undertakings providing loan , credit , or other financial services should identify the adverse impacts only at the inception of the contract. when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances. ### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on meaningful stakeholder engagement and quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in supply chains. when identifying adverse impacts that they caused or contributed to , the company should be able to first map areas of their operations , the operations of their subsidiaries and , where related to their supply chains , their direct business relationships outside the eu if they operate in risk areas , and based on the results , carry out an in-depth risk assessment prioritising the areas where the adverse impacts are most likely to be present or most significant. indirect business relationships shall be taken into account then there is substantiated knowledge of risks in those operations that the company is directly linked to , e.g. based on information gathered in the notification procedure. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way after a significant change occurs , throughout the life of an activity or relationship.


### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. regulated financial undertakings providing loan , credit , or other financial services should identify the adverse impacts only at the inception of the contract. when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances. ### (30) under the due diligence obligations set out as an obligation of means by this directive , a company should identify actual or potential adverse human rights and environmental impacts taken into account of the specificities of the company's supply chain. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information , like standardized natural capital accounting and impact valuation for businesses. for instance , as regards adverse environmental impacts , the company should obtain information for associated risks with an undertaking’s activities. for better comparability and understanding of materiality and interdependencies , quantitative information can be based on monetary valuation of sustainability impacts. impact measurement and valuation provide guidance about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context with the double materiality concept and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. regulated financial undertakings providing loan , credit , or other financial services should identify the adverse impacts only at the inception of the contract. when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances.


### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. regulated financial undertakings providing loan , credit , or other financial services should identify the adverse impacts only at the inception of the contract. when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances. ### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment;


### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. regulated financial undertakings providing loan , credit , or other financial services should identify the adverse impacts only at the inception of the contract. when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances. ### (30) under the due diligence obligations set out by this directive , a company should identify actual or potential adverse human rights and environmental impacts. in order to allow for a comprehensive identification of adverse impacts , such identification should be based on quantitative and qualitative information. for instance , as regards adverse environmental impacts , the company should obtain information about baseline conditions at higher risk sites or facilities in value chains. identification of adverse impacts should include assessing the human rights , and environmental context in a dynamic way and in regular intervals: prior to a new activity or relationship , prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment; and periodically , at least every 12 months , throughout the life of an activity or relationship. there should be appropriate guidance to ensure that regulated financial undertakings providing loan , credit , or other financial services can appropriately identify the adverse impacts of their activities at the inception of the contract as part of the on-boarding processes for new relevant clients and subject to an annual update. . when identifying adverse impacts , companies should also identify and assess the impact of a business relationship’s business model and strategies , including trading , procurement and pricing practices. where the company cannot prevent , bring to an end or minimize all its adverse impacts at the same time , it should be able to prioritize its action , provided it takes the measures reasonably available to the company , taking into account the specific circumstances.


### (31) in order to avoid undue burden on the smaller companies operating in high-impact sectors which are covered by this directive , those companies should only be obliged to identify those actual or potential severe adverse impacts that are relevant to the respective sector. ### deleted


### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. ### (32) where the company cannot prevent , mitigate , bring to an end or minimise all the identified actual and potential adverse impacts at the same time to the full extent , it should be allowed to prioritise them based on the severity and likelihood of the adverse impact. in line with the relevant international framework , the severity of an adverse impact should be assessed based on its gravity (scale of the adverse impact) , the number of persons or the extent of the environment affected (scope of the adverse impact) , its irreversibility , and difficulty to restore the situation prevailing prior to the impact (irremediable character of the adverse impact). in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action used only in cases of severe or repeated infringements of obligations under this directive , after repeated attempts at measures of risk mitigation have failed and only if it is in the best interest of those impacted (responsible disengagement) , also in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. moreover , responsible disengagement should also take into account possible impacts for those depending on the product or affected by disruptions of supply chains.


### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. ### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the upstream supply and where relevant value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a proportionate last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take.


### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. ### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable long-term engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take.


### (32) in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the value chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action , in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. ### (32) where the company cannot prevent , mitigate , bring to an end or minimise all the identified actual and potential adverse impacts at the same time to the full extent , it should be allowed to prioritise them based on the severity and likelihood of the adverse impact. in line with the relevant international framework , the severity of an adverse impact should be assessed based on its gravity (scale of the adverse impact) , the number of persons or the extent of the environment affected (scope of the adverse impact) , its irreversibility , and difficulty to restore the situation prevailing prior to the impact (irremediable character of the adverse impact). in line with international standards , prevention and mitigation as well as bringing to an end and minimisation of adverse impacts should take into account the interests of those adversely impacted. in order to enable continuous engagement with the supply chain business partner instead of termination of business relations (disengagement) and possibly exacerbating adverse impacts , this directive should ensure that disengagement is a last-resort action used only in cases of severe or repeated misconduct , after repeated attempts of bringing an actual adverse impact to an end have failed and only if it is in the best interest of those impacted (responsible disengagement) , also in line with the union`s policy of zero-tolerance on child labour. terminating a business relationship in which child labour was found could expose the child to even more severe adverse human rights impacts. this should therefore be taken into account when deciding on the appropriate action to take. moreover , responsible disengagement should also take into account possible impacts for those depending on the product or affected by disruptions of supply chains.


### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies should seek to obtain contractual assurances from a direct partner with whom they have an established business relationship that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ value chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have an established business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies. ### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention and mitigation measures , companies should develop and implement a prevention or mitigation action plan. companies are encouraged to develop their action plans in cooperation with sectoral initiatives and industry schemes. companies should seek to obtain contractual assurances from a direct partner with whom they have an direct business relationship outside of the european union that it will ensure compliance with the code of conduct or the prevention or mitigation action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ supply chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have a direct business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies.


### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies should seek to obtain contractual assurances from a direct partner with whom they have an established business relationship that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ value chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have an established business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies. ### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant depending on the circumstances and their leverage. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies may seek to obtain contractual or other assurances from a direct partner with whom they have a direct business relationship outside the eu that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding assurances from its partners to the extent that their activities are part of the companies’ supply chain where possible. the assurances may be , where appropriate , accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , and , where appropriate , collaborate with other companies to that extent. companies should also provide targeted and proportionate support for an sme with which they have a direct business relationship outside the eu such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies.


### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies should seek to obtain contractual assurances from a direct partner with whom they have an established business relationship that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ value chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have an established business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies. ### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies should seek to obtain contractual assurances from a direct partner with whom they have a business relationship that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ value chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have a business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies.


### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention measures , companies should develop and implement a prevention action plan. companies should seek to obtain contractual assurances from a direct partner with whom they have an established business relationship that it will ensure compliance with the code of conduct or the prevention action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ value chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have an established business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies. ### (34) so as to comply with the prevention and mitigation obligation under this directive , companies should be required to take the following actions , where relevant. where necessary due to the complexity of prevention and mitigation measures , companies should develop and implement a prevention or mitigation action plan. companies are encouraged to develop their action plans in cooperation with sectoral initiatives and industry schemes. companies should seek to obtain contractual assurances from a direct partner with whom they have a direct business relationship outside of the european union that it will ensure compliance with the code of conduct or the prevention or mitigation action plan , including by seeking corresponding contractual assurances from its partners to the extent that their activities are part of the companies’ supply chain. the contractual assurances should be accompanied by appropriate measures to verify compliance. to ensure comprehensive prevention of actual and potential adverse impacts , companies should also make investments which aim to prevent adverse impacts , provide targeted and proportionate support for an sme with which they have a direct business relationship such as financing , for example , through direct financing , low-interest loans , guarantees of continued sourcing , and assistance in securing financing , to help implement the code of conduct or prevention action plan , or technical guidance such as in the form of training , management systems upgrading , and collaborate with other companies.


### (35) in order to reflect the full range of options for the company in cases where potential impacts could not be addressed by the described prevention or minimisation measures , this directive should also refer to the possibility for the company to seek to conclude a contract with the indirect business partner , with a view to achieving compliance with the company’s code of conduct or a prevention action plan , and conduct appropriate measures to verify compliance of the indirect business relationship with the contract. ### (35) in order to reflect the full range of options for the company in cases where there is substantiated knowledge of severe adverse impacts in indirect business relationships outside the eu , this directive should also refer to the possibility for the company to seek to conclude a contract with the indirect business relationship , with a view to achieving compliance with the company’s code of conduct or a prevention action plan , and conduct appropriate measures to verify compliance of the indirect business relationship with the contract. this possibility should be taken into account on an ad-hoc basis and following the engagement with stakeholders.


### (36) in order to ensure that prevention and mitigation of potential adverse impacts is effective , companies should prioritize engagement with business relationships in the value chain , instead of terminating the business relationship , as a last resort action after attempting at preventing and mitigating adverse potential impacts without success. however , the directive should also , for cases where potential adverse impacts could not be addressed by the described prevention or mitigation measures , refer to the obligation for companies to refrain from entering into new or extending existing relations with the partner in question and , where the law governing their relations so entitles them to , to either temporarily suspend commercial relationships with the partner in question , while pursuing prevention and minimisation efforts , if there is reasonable expectation that these efforts are to succeed in the short-term; or to terminate the business relationship with respect to the activities concerned if the potential adverse impact is severe. in order to allow companies to fulfil that obligation , member states should provide for the availability of an option to terminate the business relationship in contracts governed by their laws. it is possible that prevention of adverse impacts at the level of indirect business relationships requires collaboration with another company , for example a company which has a direct contractual relationship with the supplier. in some instances , such collaboration could be the only realistic way of preventing adverse impacts , in particular , where the indirect business relationship is not ready to enter into a contract with the company. in these instances , the company should collaborate with the entity which can most effectively prevent or mitigate adverse impacts at the level of the indirect business relationship while respecting competition law. ### deleted


### (36) in order to ensure that prevention and mitigation of potential adverse impacts is effective , companies should prioritize engagement with business relationships in the value chain , instead of terminating the business relationship , as a last resort action after attempting at preventing and mitigating adverse potential impacts without success. however , the directive should also , for cases where potential adverse impacts could not be addressed by the described prevention or mitigation measures , refer to the obligation for companies to refrain from entering into new or extending existing relations with the partner in question and , where the law governing their relations so entitles them to , to either temporarily suspend commercial relationships with the partner in question , while pursuing prevention and minimisation efforts , if there is reasonable expectation that these efforts are to succeed in the short-term; or to terminate the business relationship with respect to the activities concerned if the potential adverse impact is severe. in order to allow companies to fulfil that obligation , member states should provide for the availability of an option to terminate the business relationship in contracts governed by their laws. it is possible that prevention of adverse impacts at the level of indirect business relationships requires collaboration with another company , for example a company which has a direct contractual relationship with the supplier. in some instances , such collaboration could be the only realistic way of preventing adverse impacts , in particular , where the indirect business relationship is not ready to enter into a contract with the company. in these instances , the company should collaborate with the entity which can most effectively prevent or mitigate adverse impacts at the level of the indirect business relationship while respecting competition law. ### (36) in order to ensure that prevention and mitigation of potential adverse impacts is effective , companies should prioritize engagement with business relationships in the supply chain , instead of terminating the business relationship , as a last resort action after attempting at preventing and mitigating adverse potential impacts without success , taking into consideration the best interest of those affected by the adverse impact and taking into account potential supply chain disruptions. however , the directive should also , for cases where potential adverse impacts could not be addressed by the described prevention or mitigation measures , refer to the possibility for companies to refrain from entering into new or extending existing relations with the partner in question and , where the law governing their relations so entitles them to , to either temporarily suspend commercial relationships with the partner in question , while pursuing prevention and minimisation efforts , if there is reasonable expectation that these efforts are to succeed in the short-term; or to terminate the business relationship with respect to the activities concerned if the potential adverse impact is severe and if these measures would be in the best interest of the potential victims. companies should not be required to refrain from entering into new or extending existing relations with the direct business partner or temporarily suspend the commercial relationship or terminate the business relationship where there is a reasonable expectation that the termination would result in an adverse impact that is more severe than the potential adverse impact that could not be prevented or adequately mitigated or where no available alternative to that business relationship , that provides a product or service essential to the company’s production of goods or provision of services , exists. in order to allow companies to fulfil that obligation , member states should provide for the availability of an option to terminate the business relationship in contracts governed by their laws.


### (37) as regards direct and indirect business relationships , industry cooperation , industry schemes and multi-stakeholder initiatives can help create additional leverage to identify , mitigate , and prevent adverse impacts. therefore it should be possible for companies to rely on such initiatives to support the implementation of their due diligence obligations laid down in this directive to the extent that such schemes and initiatives are appropriate to support the fulfilment of those obligations. companies could assess , at their own initiative , the alignment of these schemes and initiatives with the obligations under this directive. in order to ensure full information on such initiatives , the directive should also refer to the possibility for the commission and the member states to facilitate the dissemination of information on such schemes or initiatives and their outcomes. the commission , in collaboration with member states , may issue guidance for assessing the fitness of industry schemes and multi-stakeholder initiatives. ### (37) as regards direct or where applicable indirect business relationships , industry cooperation , industry schemes and multi-stakeholder initiatives help create additional leverage to identify , mitigate , and prevent adverse impacts. therefore , it should be possible for companies to rely on such initiatives to support the implementation of their due diligence obligations laid down in this directive to the extent that such schemes and initiatives are appropriate to support the fulfilment of those obligations. member states should assess the alignment of these schemes and initiatives with the obligations under this directive and assess their feasibility. however , membership of such schemes should complement , not replace company due diligence efforts. in order to ensure full information on such initiatives , the directive should also require for the commission and the member states to facilitate the dissemination of information on such schemes or initiatives and their outcomes. the commission should issue guidance for assessing the fitness of industry schemes and multi-stakeholder initiatives.