Introduction

On 13 June 2024, the European Commission adopted Directive 2024/1760 on corporate due diligence for sustainability, which, in addition to establishing binding obligations for businesses, introduces potential penalties in the event of non-compliance. It was transposed into Italian law in 2026 by European Delegation Law 36/2026 but, due to two subsequent directives that amended it (Directive (EU) 2026/470, known as ‘Omnibus I’) and postponed its entry into force (Directive (EU) 2025/794), it will only come into effect on 26 July 2029.

Directive 2024/1760 aims to ensure that large European and third-country companies with a significant presence in the EU market adopt responsible and sustainable practices across all their activities, both at national and international level.

The contents of Directive (EU) 2024/1760

Directive 2024/1760 was drawn up in response to growing pressure to introduce binding regulations governing the activities of companies operating within the EU market that have an impact on human rights and the environment. It was intended to mark the transition in Europe from voluntary corporate social responsibility (CSR) codes to binding legislation. The first draft drawn up by the Commission in 2022 was based on international standards such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. It provided for a broad scope of application: companies with 500 or more employees and a global net turnover of 150 million, whilst also extending the duty of care to the entire value chain, it included climate transition plans and a supervisory obligation on the part of directors.

However, years of lobbying and political pressure led, even in the first version adopted in 2024, to a narrowing of the scope of application, which was restricted solely to the largest companies and limited to the ‘chain of activities’ only, rather than the entire value chains, contrary to the requirements of the OECD and the UNGPs. The definition of ‘chain of operations’ explicitly excludes, for example, the distribution, transport and storage by business partners of products subject to export controls (including dual-use goods for civilian and military purposes, arms, ammunition or war material, once their export has been authorised – Art. 3.1.g.ii, Directive 2024/1760).

It has also introduced an important exception for financial institutions: whilst requiring them to carry out due diligence on their suppliers, this obligation does not extend to customers to whom they grant loans.

Under the first version, the deadline for national transposition was 26 July 2026, and its implementation was to take place in three phases, starting on 26 July 2027 for the largest European companies (with over 5,000 employees and a net turnover exceeding 1.5 billion euros), and from 26 July 2029 for smaller ones (with between 1,000 and 5,000 employees and a net turnover of between 450 million and 1.5 billion euros). The same deadlines also applied to large non-EU companies exceeding the same net turnover thresholds.

Companies must identify the adverse impacts of their operations, activities and certain business relationships on human rights and the environment, and develop responses to such adverse impacts. Among the various enforcement mechanisms, the Directive established civil liability, in accordance with the relevant Member State’s legislation, for damages resulting from a failure to comply with due diligence obligations, as well as a form of ‘administrative supervision’ by national supervisory authorities, which are empowered to impose sanctions for such breaches.

Subsequently, however, following pressure from stakeholders and various governments, the European Commission proposed a series of amendments incorporated into the so-called ‘Omnibus I’ Directive, adopted in March 2026, which narrowed the scope of the measure and simplified the obligations for companies.

Subsequent amendments: Directives 2025/794 and 2026/470

Prior to Omnibus I, under Directive 2025/794, the deadline for Member States to transpose the new rules was postponed to 26 July 2028, and the date from which the rules would apply to businesses was brought forward to 26 July 2029 for all of them. Directive 2026/47 introduced significant concessions for businesses in terms of simplifying and streamlining their respective burdens. The procedures for fulfilling the due diligence are rendered, on the whole, more flexible and less stringent.

Indeed, the threshold for applicability has been significantly raised: the obligation now applies only to businesses with at least 5,000 employees and a minimum global net turnover of 1.5 billion euros. For non-EU companies, this threshold relates to net turnover within the EU. As regards companies operating under a franchise or licence agreement within the EU, the threshold has risen from 22.5 million in royalties and 80 million in turnover to 75 million in royalties and 275 million in total net turnover.

The Directive imposes obligations on businesses, but may also affect Member States in their capacity as suppliers or partners of businesses falling within its scope. Together with the European Commission, Member States are required to provide information, tools and guidance to help businesses fulfil their due diligence obligations.

More seriously, Article 22, which required companies to adopt a transition plan to mitigate the effects of climate change and comply with the Paris Agreement, has been repealed in its entirety. The reasons given were that it would have placed an excessive burden on companies and could have given rise to legal uncertainty.

In the first approved version, companies were required to map their operations and supply chain to identify general areas of adverse impact. According to the new version, the latter must be carried out based solely on ‘reasonably available information’, focusing on areas where impacts appear most severe and likely. In the first phase, there is no requirement to map every single supplier or to request information from business partners, whilst the ‘in-depth assessment’ applies only to critical areas – those where the most probable or most serious negative impacts are concentrated. Furthermore, to avoid placing an excessive burden on smaller businesses, information may be requested from business partners only where necessary. Where such partners have fewer than 5,000 employees, this information may be requested only if it is not ‘reasonably available’ by other means (e.g. through consultation of public reports). A margin of ‘strategic flexibility’ is also allowed. Indeed, where the likelihood and severity of impacts are equal, enterprises may now prioritise assessments relating to direct business partners over those relating to indirect ones.

Furthermore, if one of its suppliers causes irreparable harm (to the environment or human rights), the legislation now only requires the company to suspend the existing commercial agreement, not to terminate it (the 2024 version provided for the termination of the commercial agreement as a mandatory measure in the event of the failure of mitigation measures). Moreover, the amended Directive allows companies to continue working with a partner as long as there is a ‘reasonable expectation’ that a ‘reinforced action plan’ (preventive or corrective) will be successful. If the outcome is positive, neither penalties nor civil liability apply.

The liability regime has been significantly simplified to uphold the principle of subsidiarity. Indeed, whilst guaranteeing victims the right to full compensation, the new legislation has repealed the liability regime originally envisaged at EU level, leaving it solely to national jurisdictions. The harmonisation clause, on the other hand, has been expanded to prevent Member States from introducing different obligations regarding identification, prioritisation and reporting.

An additional weakening of the overall regulatory framework concerns the upper limit on fines, which has been reduced from 5 per cent to 3 per cent of the company’s global net turnover.

Finally, the obligation to consult with stakeholders has been limited to certain specific stages of the process (identification, plan development and remediation) and to only those parties deemed ‘relevant’.

In line with this, certain amendments made to the initial version appear to have reduced the potential impact that this regulatory instrument could have had on workers’ safety, due to their reduced involvement in the due diligence process.

Despite the significant narrowing of the regulatory scope, 16 US Attorneys General have criticised the fact that this Directive imposes obligations on US-based companies and have called on them to continue to comply with US legislation instead.

Conclusion: a missed opportunity

As a whole, these regulatory measures aim to promote common standard due diligence criteria for companies operating within the EU. The harmonisation of corporate sustainability frameworks within the EU’s internal market fosters fair competition. However, overall, the amendments made following the adoption of Directive 2024/1760 have resulted in a significant narrowing of the scope of the original directive.

In light of subsequent amendments, Directive (EU) 2024/1760 appears to represent a partially missed opportunity to effectively regulate a crucial area that lacks a binding international regulatory framework. Furthermore, several of the criteria adopted deviate significantly from relevant (non-binding) international standards, such as the United Nations Guiding Principles (UNGP) and the OECD Guidelines. For instance, the duty of care is limited to the ‘chain of activities’ rather than encompassing the entire ‘value chain’.

Other setbacks introduced by the European legislator concern the application of obligations solely to ‘very large’ enterprises, leaving the rest of the market unprotected, and the reduction of the cap on financial penalties to 3 per cent of global net turnover.

In conclusion, this Directive leaves the issue of corporate due diligence on human rights and environmental protection largely open to exploitation for marketing and greenwashing purposes. Such an outcome would not be in line with the original intention of regulating the protection of human rights and the environment throughout the production and distribution chain, through binding, stringent and uniform provisions. In the near future, in light of its actual implementation in various national contexts, it will be possible to assess its effectiveness and limitations more accurately.