A new initiative law on ‘Responsible and Sustainable International Business Conduct’, has been submitted to the Dutch Parliament on 1 November by six political parties. The law obliges companies to conduct business with respect for human rights, the environment, and the climate. The initiative law is based on the OECD Guidelines for Multinational Enterprises, a set of rules that companies are already accustomed to working with. Companies must map their production chains and identify possible abuses. If abuses are found, a company must address them and, in some cases, repair them. An independent supervisor will monitor compliance with the law.
The proposed law provides for multiple new avenues for seeking remedy and justice by way of administrative, civil, and criminal liability regimes. Companies have a duty to remediate or enable remediation of harms they cause or to which they contribute. If they fail to do so, they are subject to an administrative penalty that accrues each day that the company remains in breach of its duty. In addition, individuals or organizations seeking to protect human rights and the environment that consider that a company has caused harm as a result of its failure to comply with its due diligence obligations can file suit in civil court to hold the company liable for that harm. The law also contains a provision on criminal liability for “economic offenses” committed by corporate board members responsible for repeated breaches of the law.
The law obligates companies with more than 250 employees to conduct due diligence in line with the OECD guidelines, to identify and address negative impacts in their own operations and throughout their supply chains. Issues covered by the draft law range from restriction of fundamental labour rights such as freedom of association and collective bargaining, to forced and child labour, to occupational health and safety and harms to the environment. The bill covers all types of financial sector companies, including banks, investors, and pension funds. Companies providing financial products and services have the same obligation to conduct due diligence and address risks and impacts in their value chains as other companies.
According the law, companies should ensure an adequate approach to the identified potential and actual risks of adverse consequences for human rights and the environment and draws up an action plan to prevent or limit those risks of adverse consequences of its activities and those of business relations or terminate. The action plan should minimum contain: a description of the identified potential and actual risks of adverse consequences for the entire value chain; quantitative and qualitative objectives for the measures to prevent, limit or eliminate each risk, broken down by priority; a description of the influence that is or will be exercised on business relations in the event of potential and actual risks identified with them; a division of tasks between employees employed by the company or external parties for the implementation of this plan; and a financial justification for each measure.
The proposal clearly indicates that if a company’s efforts to convince a business partner to prevent or mitigate harmful impacts are unsuccessful, the company should disengage responsibly from the relationship. It further specifies that responsible disengagement means that when exiting a relationship or situation, companies must identify and prevent or mitigate adverse impacts associated with the disengagement itself and remediate past harms the company caused or contributed to; cutting and running is a breach of the due diligence duty. The responsible exit provision also applies to disengagement for other reasons such as a government change to an oppressive or abusive regime in which the company cannot justify remaining, a context of armed conflict, economic or business decision, etc. In each of these cases, companies must disengage responsibly, with respect for human and labour rights and the environment.
It is recognised that a company’s relationship to an adverse impact, and its responsibility to address it, can shift over time depending on the adequacy and effectiveness of the company’s due diligence. This means that if a company is unsuccessful in convincing a business partner to stop harmful behaviour, but nonetheless decides to stay in the relationship, it may, over time, be considered to be contributing to the impact, not merely linked to it. Companies can collaborate in conducting due diligence, for example through multi-stakeholder initiatives or industry schemes. However, the proposed law is clear about the individual responsibility of each company for addressing risks and impacts throughout its value chain.
A discussion in the Dutch Parliament on the initiative law is planned for 26 January 2023