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Articles 10 and 11 put suspension and termination after engagement, action plans, assurances, and verification. If potential impacts cannot be prevented or adequately mitigated, Article 10 requires last-resort escalation: no new or extended relationship for the affected activities, temporary suspension with an enhanced prevention action plan where there is a reasonable expectation of success, or termination where severe potential impacts remain and the enhanced plan is not viable or fails.

For actual adverse impacts, Article 11 uses the same last-resort logic with an enhanced corrective action plan. Before suspending or terminating, the company must assess whether the adverse impacts of suspension or termination would be manifestly more severe than the impact it is trying to address; if it proceeds, it must take steps to prevent, mitigate, or end the impacts of the suspension or termination, give reasonable notice, and keep the decision under review.

For EU companies, Article 2(1)(c) applies where the company, or the ultimate parent company of a group, has entered into franchising or licensing agreements in the Union with independent third-party companies. The agreements must be in return for royalties, must ensure a common identity, a common business concept, and uniform business methods, and the royalty and turnover thresholds must be met.

The monetary test is two-part. Royalties from those franchise or licensing agreements must amount to more than EUR 22.5 million in the last financial year for which annual financial statements have been or should have been adopted. The company, or group headed by the ultimate parent, must also have net worldwide turnover of more than EUR 80 million in that same financial year.

This is a separate scope route. A company can be outside the general Article 2(1)(a) route for companies with more than 1,000 employees and more than EUR 450 million net worldwide turnover, yet still need to test the franchise or licensing route if its brand network facts meet Article 2(1)(c).

Article 2 does not treat a bare trademark permission as enough. The franchise or licensing agreements must ensure all three network features: common identity, common business concept, and uniform business methods.

In practice, review the contract package and operating model together. Common identity points to shared brand, trade name, visual identity, store concept, platform identity, or customer-facing presentation. Common business concept points to a replicated commercial model, product or service proposition, customer journey, or network format. Uniform business methods point to required operating manuals, quality standards, sourcing rules, technology stack, training, audit rights, or mandatory service processes.

The safer review position is to record the evidence for each of the three Article 2 features separately. If one feature is missing, explain why the agreement is ordinary IP licensing, distribution, agency, or supply rather than the CSDDD franchise/licensing scope route.

The franchise/licensing route exists for both EU companies and third-country companies, but the turnover geography differs. For EU companies, Article 2(1)(c) uses net worldwide turnover above EUR 80 million. For third-country companies, Article 2(2)(c) uses net turnover of more than EUR 80 million in the Union.

The royalty geography also differs. EU companies test whether royalties from qualifying franchising or licensing agreements amounted to more than EUR 22.5 million in the last financial year for which annual financial statements have been or should have been adopted. Third-country companies test whether those royalties amounted to more than EUR 22.5 million in the Union in the financial year preceding the last financial year.

For third-country companies, the CSDDD does not add an employee threshold. The Directive explains that the employee threshold is not used for third-country scope because the relevant worker concept is based on Union law and would create legal uncertainty outside the Union.

The grounded material shows Directive (EU) 2025/794 as an amendment to Directive (EU) 2024/1760 and shows the Article 37 timing changes in the consolidated text. It does not show a change to the Article 2 franchise/licensing thresholds or the three network features.

For this FAQ, the practical consequence is simple: use current Article 37 timing when planning implementation waves, but do not change the Article 2 franchise/licensing scope test unless the consolidated legal text changes the scope wording itself.

The consolidated Article 37 text reflected in the grounding material sets Member State transposition by 26 July 2027 and application from 26 July 2028 for the first listed company cohorts, with all other listed Article 2 cohorts, including Article 2(1)(c) and Article 2(2)(c), from 26 July 2029.

Keep evidence that lets a reviewer recalculate Article 2 without interviewing the original deal team. The file should connect legal agreements, royalty accounting, turnover data, group structure, and the operational features of the network.

The evidence should also show who owns follow-up if the business changes. Scope can change when a licensing programme adds operating manuals, a brand network expands in the Union, royalty lines are reclassified, a parent company changes, or turnover crosses the threshold for two consecutive financial years.

The most common mistake is treating every licence as in scope or every licence as out of scope. Article 2 asks a narrower factual question: does the agreement create the kind of controlled network described by common identity, common business concept, and uniform business methods, and are the royalty and turnover thresholds met?

A second mistake is mixing EU and non-EU calculations. EU companies test worldwide turnover for the EUR 80 million franchise/licensing route; third-country companies test Union turnover. The royalty calculation is also Union-specific for third-country companies.

A third mistake is using the general EUR 450 million turnover threshold as if it replaced the franchise/licensing route. Article 2 contains both routes. A brand owner below the general scope threshold may still need a franchise/licensing analysis if royalties and turnover meet Article 2(1)(c) or Article 2(2)(c).

Not by itself. For companies formed under the law of a third country, Article 2 uses net turnover generated in the Union. A non-EU company is in scope if it generated more than EUR 450 million in net turnover in the Union in the financial year preceding the last financial year, or if it is the ultimate parent of a group that reached that Union threshold on a consolidated basis.

Article 2 also contains a separate franchising and licensing route for third-country companies: qualifying EU franchising or licensing royalties above EUR 22.5 million, combined with more than EUR 80 million in Union net turnover, can bring the company or ultimate parent group into scope. The safe approach is to check EU-generated turnover and any qualifying licensing structure before treating a global group as in scope.

Article 2 frames the non-EU threshold by reference to the financial year preceding the last financial year, and it says the Directive applies only if the scope conditions are met in two consecutive financial years. A useful scope file therefore should not contain a single annual sales number with no bridge to the statutory test.

Current Article 37, as amended by Directive (EU) 2025/794, applies the first non-EU wave from 26 July 2028 for Article 2(2)(a) and (b) companies that generated more than EUR 900 million in Union net turnover in the financial year preceding the last financial year before that date. Other Article 2(2) companies follow from 26 July 2029. Avoid describing the 2025 timing change as only a proposal.

If the Article 2(2) test is met, the company should prepare the governance and regulator-facing records that the Directive expects from third-country companies. Article 23 requires an authorised representative established or domiciled in a Member State where the company operates, accepted by that representative, and empowered to receive supervisory authority communications.

Article 24 then points to the competent supervisory authority. For a third-country company, the competent authority is generally the Member State where the company has a branch. If there is no branch, or there are branches in several Member States, the relevant authority is tied to where the company generated most of its Union net turnover under the Article 24 rule.

A useful non-EU turnover file should let finance, legal, sustainability, and regional teams reproduce the conclusion without relying on memory. It should connect the legal entity and group perimeter to the Union turnover calculation, branch footprint, licensing arrangements, and authorised representative status.

Article 28 also shows why this evidence matters externally: Member States and the European Network of Supervisory Authorities cooperate to identify third-country companies in scope, including through information about net turnover generated in the Union. The company should expect its EU-turnover position to be understandable to a supervisory authority.

The main mistake is treating 'non-EU turnover' as a general sales concept. For CSDDD scope, the relevant question is Union-generated net turnover for a company formed under third-country law, plus any group or franchising/licensing route in Article 2.

A second mistake is copying old application dates or proposal language into a scope memo. The consolidated Directive records Directive (EU) 2025/794 as an adopted amendment to Article 37, so timing notes should use the current 26 July 2028 and 26 July 2029 structure where timing is discussed.

Replace any pre-2025 CSDDD rollout calendar with the current Article 37 calendar shown in the consolidated EUR-Lex text. That text identifies Directive (EU) 2025/794 as an amendment to Directive (EU) 2024/1760 and sets the transposition deadline at 26 July 2027.

The key operational change is classification. Label each roadmap item as one of three things: current CSDDD law after Directive (EU) 2025/794, national transposition work to watch, or proposal-stage Omnibus simplification that should not yet be implemented as if it were adopted law.

The current Article 37 timing is no longer the original 2024 schedule. Member States must adopt and publish national implementing measures by 26 July 2027. The first company application phase begins on 26 July 2028, and the broader phase follows on 26 July 2029.

For Article 16 communication, Article 37 applies a later financial-year rule: the 26 July 2028 cohorts are tied to financial years starting on or after 1 January 2029, and the 26 July 2029 cohort is tied to financial years starting on or after 1 January 2030.

Do not merge the adopted timing change with the broader simplification proposal. The Commission CSDDD page describes the Omnibus proposal to simplify duties and reduce regulatory burden, but also states that it goes to the European Parliament and Council for consideration and adoption and that changes enter into force after co-legislator agreement and Official Journal publication.

That means teams can monitor the proposal and prepare impact analyses, but should not rewrite binding CSDDD controls around proposed changes to the due diligence process, stakeholder engagement, monitoring cadence, penalties, civil liability, or transition-plan requirements unless an adopted amendment later changes the consolidated Directive.

Keep evidence that proves the organization did not rely on outdated dates or treat pending proposals as adopted law. The file should let legal, sustainability, finance, procurement, and reporting teams see the same current schedule and the same proposal watch list.

A useful record is narrow: it ties each entity or group to an Article 37 cohort, records the Article 16 timing conclusion, and keeps proposal-stage simplification items out of mandatory control changes until their status changes.

Prevention is the first Article 10 objective for a potential adverse impact: stop the impact from occurring where possible. Mitigation is the Article 10 fallback where prevention is not possible or not immediately possible: reduce the likelihood, severity, or conditions that could allow the potential impact to occur.

For an actual adverse impact, the vocabulary changes. Article 11 requires companies to bring the impact to an end. If the impact cannot immediately be brought to an end, the company must minimise its extent and use corrective measures proportionate to the severity of the impact and the company's implication in it.

Start with the Article 8 identification record. Map the company's own operations, subsidiaries, and relevant chains of activities, then decide whether the finding is a potential adverse impact or an actual adverse impact. If multiple impacts cannot be addressed at the same time, Article 9 requires prioritisation based on severity and likelihood.

The classification should also record involvement and leverage. Articles 10 and 11 both ask whether the company caused, jointly caused, contributed through acts or omissions with a subsidiary or business partner, or is linked through a business partner in the chain of activities, and whether the company can influence the relevant business partner.

For potential adverse impacts, Article 10 lists measures that may be relevant depending on the circumstances. A prevention action plan is needed where the nature or complexity of the measures requires one, and it should include reasonable and clearly defined timelines plus qualitative and quantitative indicators for improvement.

The plan should not stop at supplier clauses. Article 10 also points to investments, operational adjustments, purchasing-practice changes, design and distribution changes, targeted SME support, and collaboration where that increases the company's ability to prevent or mitigate the potential adverse impact.

Once the impact is actual, the response should be managed as Article 11 work. The first objective is to bring the impact to an end. If that cannot happen immediately, the company must minimise the extent of the impact, and Article 11 measures include neutralising the impact or minimising its extent, corrective action plans, contractual assurances, investments, operational changes, SME support, collaboration, and remediation where Article 12 applies.

A corrective action plan is not the same thing as a prevention action plan. It should be tied to the specific actual impact, use reasonable and clearly defined timelines, and include qualitative and quantitative indicators for measuring improvement.