Initiative overview
The Directive addresses the challenge that growing complexity and the global nature of value chains make it hard for companies to obtain reliable information on business partners' operations, while fragmented national due diligence rules had slowed the take-up of good practices across the EU. Demand for action was strong: 70% of businesses responding to the public consultation said EU action was needed, and civil society, citizens and business associations had been calling for mandatory rules. Only a third of companies had already taken measures to address their adverse impacts, with progress described as slow and uneven.
The Directive applies to large EU companies and partnerships with at least 5,000 employees and EUR 1.5 billion worldwide net turnover (including on a consolidated basis for ultimate parent companies), and large non-EU companies with at least EUR 1.5 billion net turnover within the EU. Franchising and licensing arrangements can also bring companies into scope where royalty and turnover thresholds are met. Micro companies and SMEs are excluded, though the Directive provides supporting measures for SMEs, Small Midcap Companies and other smaller business partners indirectly affected through value chains, including limits on information requests, guidance and model contractual clauses. Following the Omnibus I amendments, companies may now focus efforts on areas where impacts are most likely and severe, based on reasonably available information.
Enforcement combines administrative supervision and civil liability under national law. Member States must designate authorities to supervise and enforce the rules, including through injunctive orders and dissuasive penalties, capped at 3% of a company's net worldwide turnover for the most serious violations. The Commission will establish a European Network of Supervisory Authorities to coordinate national bodies. Where a company is held liable for damage caused by non-compliance, affected persons have a right to full compensation.
Implementation is being phased in over several years. The Omnibus I package has been adopted, with Directive (EU) 2025/794 postponing certain application dates and Directive (EU) 2026/470 introducing the substantive amendments, entering into force on 18 March 2026. Member States must transpose the amended rules by 26 July 2028 and apply them from 26 July 2029, except Article 16 reporting measures, applying from financial years starting on or after 1 January 2030. Commission guidance and model contractual clauses are due by 26 July 2027 and 26 July 2028.
