When it rains HRDD legislation, it pours

Anna Triponel

March 21, 2021

Hot on the heels of the European Parliament’s proposed text to conduct environmental and human rights due diligence along their full value chains, four Dutch political parties have introduced a similar bill to the Dutch Parliament. The proposed Bill for Responsible and Sustainable International Business Conduct would create a new duty of care, and require companies to conduct due diligence on their human rights, labour and environmental impacts in the supply chain and monitor and report publicly on those efforts.

Background and context

  • In March 2021, four major political parties in the Netherlands—Labour, Greens, Socialists and the Christian Union—submitted to the Dutch Parliament a Bill for Responsible and Sustainable International Business Conduct (Wet verantwoord en duurzaam internationaal ondernemen)
  • The bill mirrors due diligence expectations set out in the UN Guiding Principles on Human Rights as well as in the OECD Due Diligence Guidance for Responsible Business Conduct. It was developed with the support and partnership of the MVO Platform, a network of civil society organisations and trade unions in the field of corporate accountability (you can download the unofficial translation of the bill, translated by MVO Platform, here).
  • The bill aims to replace the 2019 Dutch Child Labour Due Diligence Act, which has been adopted by Parliament but not yet entered into force. The Child Labour Due Diligence Act imposes a legal requirement for Dutch companies to identify whether there are instances of child labour in their supply chains, and to prevent and address these issues (you can read an unofficial translation of the Act, translated by law firm Ropes & Gray, here; you can also find additional analysis and FAQs about the law on the BHR in Law website).

What the bill entails

All quotations below are taken from the unofficial English translation of the bill

  • Duty of care: The Responsible and Sustainable International Business Conduct Bill establishes a duty of care for “any enterprise that knows or can reasonably suspect that its activities may have negative impacts on human rights, labour rights or the environment in countries outside the Netherlands.” These companies must:
  • “a. take all measures that may be reasonably required of it to prevent such impacts;”
  • “b. to the extent that such impacts cannot be prevented: mitigate or reverse them to the extent possible and, where necessary, to enable remediation;”
  • “c. to the extent that such impacts cannot be limited sufficiently: refrain from the relevant activity in so far as that may reasonably be expected from the enterprise.”
  • Scope of application: The bill applies to both companies that are registered in the Netherlands or its overseas territories, as well as companies that conduct activities or market products in the Netherlands.
  • Scope of due diligence: The bill applies to companies conducting business activities and sourcing outside the Netherlands and also meeting certain size and revenue requirements (balance sheet value of at least €20 million, net revenue of at least €40 million, and/or at least 250 employees).
  • What is required: Companies meeting the criteria would need to publish a policy and plan for conducting due diligence, and this plan must be implemented and managed throughout regular business processes. They would also need to identify potential and actual negative impacts in their supply chains and create an action plan to prevent and mitigate these impacts. Companies are asked to cease their activities if they cause or contribute to negative impacts on human rights, labour rights and the environment
  • Prioritisation of risks: In line with the concept of salience outlined by the UN Guiding Principles on Business and Human Rights, companies may prioritise action on their risks and impacts based on severity and likelihood. The government may seek to set more specific rules and guidance for prioritisation of risks at a later point.
  • Monitoring and reporting: Companies must continually monitor the effectiveness of their due diligence systems and must report annually on their policy and due diligence plans, “including the findings from monitoring and the results of any measures they have taken.”
  • Remediation: Companies need to establish a mechanism to receive grievances from stakeholders and remediate the company’s adverse impacts, or “cooperate with an existing remediation mechanism.” In line with the UNGPs, the bill also states that, if an enterprise has caused or contributed to harm it must provide or contribute to remediation and use its leverage to prevent and mitigate remaining impacts. If the company is directly linked to a harm through its business relationships, it must use leverage or terminate the business relationship.
  • Enforcement: A regulator will be tasked with supervision and enforcement, and can issue an administrative penalty or an order subject to a penalty (instructions). If the company becomes subject to a third penalty/ order in five years, the offence becomes a criminal offence (through application of the Economic Offences Act).

What happens next

  • According to an analysis of the bill by Joseph Wilde-Ramsing of the Centre for Research on Multinational Corporations (SOMO) and OECD Watch, and Manon Wolfkamp and David Ollivier de Leth of the MVO Platform, the Dutch Foreign Ministry is currently pushing for the adoption of a directive on responsible business conduct at the European Union level while in parallel “preparing ‘building blocks’ for national due diligence legislation, which are expected to become public this summer.”
  • However, the final outcome for the bill will be dependent on the results of government coalition agreements taking shape now following the March 17th parliamentary elections in the Netherlands.
  • In the meantime, “[a] broad movement of civil society organisations, trade unions, progressive businesses, religious organisations and academics has been campaigning for adoption of the bill, and will continue doing so in the coming months.”

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