The Netherlands is the latest in a series of countries stepping up efforts to mandate corporate human rights and environmental due diligence. This confirms a growing trend of legal initiatives being passed across Europe and beyond to promote responsible business conduct and increased transparency. What is currently just a bill could, if approved, repeal the Dutch Child Labour Due Diligence Law.
In Germany, the Supply Chain Act is scheduled for adoption in June which is also the indicative timeline given by the European Commission for the release of their legislative proposal on Sustainable Corporate Governance.
On 11 March 2021, four political parties submitted the Bill for Responsible and Sustainable International Business Conduct to the Dutch Parliament (unofficial translation by MVO platform available here).
Provided the bill is adopted, which will largely depend on the aftermath of the recent political elections, it would repeal the yet to enter into effect Dutch Child Labour Due Diligence Law for which the Dutch Government was developing implementing orders.
Objectives and scope of the Dutch bill
The bill for Responsible and Sustainable International Business Conduct establishes a duty of care for companies registered in the Netherlands or that sell products / deliver services onto the Dutch market to prevent and mitigate adverse human rights and environmental impacts along their value chains and, where necessary, to enable remediation.
It stipulates that companies engaging in activities outside the Netherlands and exceeding at least two of the following criteria (250 employees, a total balance sheet of more than 20 million euros, and net revenues of more than 40 million euros) would be subject to a due diligence obligation modelled along the lines of the OECD Guidelines six-step framework. The companies meeting the above criteria would therefore have to develop a policy commitment, draw up an action plan, monitor progress, annually report and provide remedy where appropriate.
The bill foresees administrative, civil and criminal liability. As far as enforcement is concerned, an independent public regulator would be empowered to issue binding instructions, financial sanctions but also positive guidance.
Where do things stand in Germany?
Following a breakthrough in February, the draft of the German supply chain law was agreed upon at Cabinet level early March. It stipulates an entry into force date in 2023 for companies with more than 3.000 employees with obligations extending to companies with 1.000 employees as of 2024.
According to the text, companies in scope must exercise, document and annually report on their due diligence work. Obligations also include some forms of environmental due diligence. Companies will be required to have an own grievance mechanism or join an existing one.
The Federal Office for Economic Affairs and Export Control will be tasked with the monitoring and enforcement of the law, including issuing administrative fines, but also with support to companies by providing advice. The draft also strengthens the NGOs’ and trade unions’ procedural rights.
Companies in breach of the obligations could be excluded from public procurement for up to 3 years.
Due to the upcoming political elections, the text is expected for adoption in June.
In the meantime, what is happening at EU level?
The European Commission is currently busy working on the impact assessment that will accompany the sustainable corporate governance legislative proposal due in June, following a public consultation that closed on 8 February.
From various statements made since the official announcement in April last year, the Commission’s legislative proposal is likely to:
- Be grounded on international normative frameworks such as the UNGPs and the OECD Guidelines for Multinational Enterprises
- Stipulate obligations to conduct both human rights and environmental due diligence along the value chain for companies operating in the EU market (both EU and non-EU, most probably not only large ones but also high-risk SMEs)
- Foresee both administrative and civil liability.
The European Parliament has already made its voice heard and adopted in March a report by a large majority which outlines MEPs’ expectations as to how the future EU legislation should look like.
In parallel, the European Commission is working on revising the EU Non-Financial Reporting Directive to increase corporate transparency and bring sustainable investment to scale. A revised proposal is to be presented in the course of this month.
In December 2019, amfori contributed to the Finnish Presidency flagship event on business and human rights and published a position on human rights due diligence in February 2020.
Later in the year, we created a platform of stakeholders to sharpen the collective intelligence on the impact of an upcoming EU legislation.
We recently reaffirmed our support for action at EU level by publishing an open letter and outlined the key features we would like to see in the future EU law at an event by the EP Responsible Business Conduct Working Group.
If you want to know more about amfori Advocacy and our work on HRDD, get in touch with email@example.com, Senior Social Policy Advisor.