The Dutch government has started work on national human rights due diligence legislation, which will be implemented quickly. This follows the recent announcement by the European Commission (EC) that it will again postpone the publication of its proposed directive on sustainable corporate governance until 2022. This article examines the likely key aspects of Dutch law and how companies can prepare for it.

Mandatory Human Rights Due Diligence Context

The 2010 United Nations Guiding Principles (UNGP) on Responsible Business Conduct introduced the concept of Human Rights Due Diligence (HRDD). It is an ongoing risk management process that a reasonable and prudent company must follow to identify, prevent, mitigate and explain how it deals with its negative human rights impacts.

The process includes four key steps: assessing actual and potential impacts on human rights; integrate and act on the results; follow-up of responses; and communicate on how impacts are treated.

The HRDD process was also included in the 2011 version of the OECD Guidelines on Responsible Business Conduct, and has since taken off. Beyond its original non-binding and non-legal nature, in recent years several Member States such as France and, more recently, Germany, have introduced mandatory national legislation (also known as mandatory HRDD or mHRDD).

The European Commission has announced that it will present mandatory EU-wide human rights and environmental due diligence legislation in 2021. This is to avoid fragmentation of the single market through various national initiatives and to provide the EU with a harmonized set of due diligence rules applicable in all countries. Member States.

But seizing the initiative, the European Parliament presented in March 2021 a recommendation accompanied by a text for a directive on sustainable corporate governance. This described the obligations and potential sanctions to be imposed on companies operating in the EU market.

This is a hotly contested proposal that has been strongly rejected by the European Commission’s own Regulatory Review Board.

After these delays, the formal Commission proposal is now only expected to be published in 2022.

The delay is most likely due to the practical difficulties of applying the rules to such a wide range of companies and on such a wide range of subjects – human rights, forced labor, environment, governance. This has raised concerns among various stakeholders and several Member States. This is where the Dutch process becomes particularly interesting.

Context of the Dutch legislative process

The respective Dutch governments have traditionally had a strong preference for voluntary mechanisms aimed at improving responsible business conduct, notably in the form of sectoral agreements on responsible business.

A recent review of these covenants revealed, however, that they have failed to significantly increase the number of companies “performing” human rights due diligence.

As a result, the government had commissioned a study of the different options for enacting human and corporate rights violations.

But when the EC indicated that it wanted to develop a sustainable corporate governance directive that included mandatory HRD provisions, the government’s socio-economic advisory board and the responsible minister felt that the development of a European regulation should prevail over national legislation, provided that the EU legislative process does not lead to undue delays.

Much of parliament, however, has a strong preference for passing national legislation and has even proposed a legislative initiative, including mandatory HRD provisions.

As noted above, the original deadline to share a proposal in 2021 will not be met. In light of the substantial pressure exerted by the Dutch Parliament and in an effort to put additional pressure on the European Commission, the responsible minister indicated during a parliamentary debate that the Dutch government would start working on national legislation relating to the HRD, to be implemented quickly.

Key aspects

Although there is no proposal yet, the responsible minister shared some ideas on the envisaged legislation:

• The Minister indicated that Dutch legislation will be broader and stricter than the legislation of neighboring jurisdictions (Germany, France, United Kingdom). In the Dutch legislative initiative of 11 March 2021, the national parliament called for a widening of the scope of the child labor law to also cover other impacts on human rights, such as discrimination and environmental damage.
• The legislation will apply to companies with more than 250 employees – significantly less than, for example, the required German threshold of 3,000 workers (initially) and 1,000 (at a later stage).
• The due diligence obligation will most likely apply not only to human rights in a traditional definition, but also to environmental issues and climate change.
• Most SMEs with less than 250 employees have no due diligence obligation, but will have an obligation of transparency – similar to the British modern slavery statements. This could differ from the European approach described by the European Parliament, which recommends that the Commission apply due diligence rules also to listed and high-risk SMEs.
• A recent proposal from the government’s Socio-Economic Advisory Council suggested a number of methods to ease the administrative burden. A number of these will likely be included in the legislative proposal, notably by allowing a sectoral approach to certain obligations, allowing collective complaints mechanisms and relaxing transparency requirements for medium-sized companies.

Actions for customers

Human rights due diligence is a policy rather than a binding legal principle, and a simple copy of the UN Guiding Principles on Hard Law is fraught with complications. The HRD initiatives of the European Parliament and the Dutch legislature are not well thought out and contain confused wording.

Nonetheless, NGOs have already launched public campaigns to make the legislation as broad and binding as possible. The government has indicated that it wants to act quickly on this, so we expect a lot of activity around this proposal in the coming months. Businesses should seek to make their voice heard in the legislative process and guide lawmakers in Brussels and The Hague.

Human rights due diligence will become a key aspect of mandatory and voluntary standards for businesses in the years to come. Putting human rights policies in place, integrating these policies into governance and corporate management functions and ensuring proper implementation is no easy task. They take time and effort. Companies should start preparing their supply chains now. In Brussels and Amsterdam, we are here to help.