Responsible and sustainable international business

Responsible and sustainable international business

On 11 March 2021, members of parliament introduced a bill for the Responsible and Sustainable International Business Act. The proposal is for “rules for due diligence in production chains to counteract violations of human rights, labour rights and the environment in the conduct of foreign trade”. The proposal is in line with international and national calls for better and fairer working conditions.

Within the framework of corporate social responsibility (CSR), we have previously discussed the consequences of international trade for people and the environment. Because of the enormous price competition that takes place internationally, companies look for cheap, often foreign, labour. That these workers in cases have to work under miserable conditions became clear when a garment factory in Bangladesh collapsed in 2013. That is just one example, think also of child labour in China, among others, and migrant workers in Peru who have to work on a sprayed field with toxic pesticides (source: Amnesty International).

The Responsible and Sustainable International Business Act

The Explanatory Memorandum clearly sets out the main points of the Responsible and Sustainable International Business Act. The Act can be divided into four parts:

  • scope
  • statutory duty of care
  • duty of due care
  • monitoring

The scope section looks at how wide the scope of the law is. In other words: which actors must comply with the Act? These are all companies that conduct foreign trade, large companies that conduct foreign trade, companies on the BES (islands) and large foreign companies that sell products on the Dutch market or carry out activities in the Netherlands. The Act therefore applies not only to companies that have the Netherlands as their home country, but also to foreign companies that operate in the Netherlands.

The duty of care regarding responsible and sustainable international business is laid down in the aforementioned Act: it is a statutory duty of care. This duty of care applies from the moment that “a company knows or can reasonably suspect that its activity can have adverse effects on human rights, labour rights or the environment in a country outside the Netherlands” and applies to all Dutch companies that conduct foreign trade. In that case, an enterprise is obliged to (a) take all measures that can reasonably be required of it to prevent those consequences; (b) to the extent that those consequences cannot be prevented: to limit those consequences as much as possible, reverse those consequences, and, if necessary, take remedial action; and (c) if those consequences cannot be limited sufficiently: to refrain from engaging in that activity, to the extent that this can reasonably be required of it. This can be found in Article 1.2.

In addition, large corporations engaged in foreign trade are subject to the duty of due diligence. The six steps, which are known as the “OECD steps” with regard to Due Diligence, are laid down in several articles of the aforementioned Act.

  • Step 1: Integrating Corporate Social Responsibility (CSR) into the company’s policy and management systems (art. 2).
  • Step 2: Recognising actual or potential adverse effects on the implementation of CSR (art. 3)
  • Step 3: Elimination, prevention or mitigation of the identified adverse effects (Art. 3 and 2.4).
  • Step 4: Monitoring the practical application and results of CSR policy (Article 2.5).
  • Step 5: Communicating how the negative impacts can be addressed (Art. 6)
  • Step 6: Where applicable, enabling or assisting in the remediation of adverse effects (Art. 7 and 2.8).

Administrative law enforcement of the implementation of and compliance with the Act has been entrusted to the supervisory authority. Supervision can be divided into positive supervision and repressive supervision. Positive supervision is regulated in Articles 3.1 in conjunction with 3.3 and is light in nature. The supervisor provides information on the need for implementation and gives an instruction. Repressive supervision is more binding, as the supervisory body may impose an order subject to a penalty or an administrative fine in order to ensure compliance with the Act (see Articles 3.2 to 3.5).

If the instruments under supervision are not sufficient to make the company comply with the Act, enforcement can be initiated. Enforcement can take place on the civil law basis of 6:162 of the Dutch Civil Code (on the basis of a wrongful act by the company towards a person concerned who observes or experiences negative consequences) and on a criminal law basis. Criminal enforcement takes place on the basis of the Economic Offences Act if administrative enforcement does not lead to the cessation of the harmful activities or to recovery.

The legislative procedure on the initiative has not yet been completed.

Do you have questions about corporate social responsibility? Then contact the specialised lawyers at Law & More. We will be happy to help.