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Netherlands: Update on ESG Legislation

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There is a trend in the Netherlands where companies are urged to comply promptly with ESG objectives. Therefore it is important to comply timeously with applicable legislation to mitigate risks of enforcement by shareholders, accountants, the Dutch Authority for the Financial Markets (AFM), employees, trade unions, green organisations etc. In this blog we will bring you the latest developments regarding ESG legislation in the Netherlands.

Act on Responsible and Sustainable International Business (Wet verantwoord en duurzaam internationaal ondernemen)

The draft bill related to the Act on Responsible and Sustainable International Business is currently under parliamentary review. Here are some of the key updates:

Legislative Review:

The legislative proposal addresses various forms of human rights violations. Recently, the legislation has seen several revisions on 15 September 2023 and 2 November 2023. These amendments have addressed concerns raised by entrepreneurs and the Council of State (Raad van State) regarding potential enforceability issues, many open norms and broad scope included in the draft proposal that may violate principles of legal certainty and proportionality:

  • The bill now explicitly specifies that the duty of care is governed by civil law, with only fines, not prison sentences, as the enforcement mechanism.
  • Entrepreneurs are relieved from personal liability, with the focus placed on holding companies accountable.
  • The originally proposed burden of proof has been adjusted to a “relief from the burden of proof”, shifting the responsibility for providing sufficient evidence to be compliant.
  • More detailed applicable norms and documentation requirements have been included.

Scope:

The bill establishes a legal duty of care for all Dutch companies engaged in international trade. Companies must take reasonable steps to prevent adverse effects, mitigate them, rectify them, and provide solutions. Large Dutch companies engaged in foreign trade are also mandated to implement due diligence in their value chains, aligning with the OECD guidelines. The legislation addresses various forms of human rights violations, environmental damage, and climate-related harm throughout the entire value chain.

Enforcement and Litigation:

The Dutch Consumer & Market Authority (ACM) is responsible for enforcing compliance with the Act.

Implementing of the Corporate Sustainability Reporting Directive

On 5 January 2023 the Corporate Sustainability Reporting Directive entered into force. This new directive modernises and strengthens the rules concerning the social and environmental information that companies have to report. A broader set of large companies will now be required to report on sustainability. A Dutch legislative proposal implementing parts of the Corporate Sustainability Reporting Directive is currently in a consultation phase. This legislative proposal specifically addresses the verification of compliance with sustainability reporting requirements by an external auditor. Please note that there is some overlap between implementation of the Corporate Sustainability Reporting Directive and the draft bill above. We will keep you updated about relevant legislative updates.

Under the CSRD, companies will be required to prepare a sustainability report as part of the annual report, in accordance with the European Sustainability Reporting Standards (ESRS).

Reporting Obligation CO2 Emissions

Organisations with 100 or more employees must report on their employees’ work-related travel under the Dutch Decree CO2 Reduction Work with regards to how their personnel commutes (Besluit CO2 Reductie Werkgebonden Personenmobiliteit). The report should include details on the total kilometres travelled, vehicle type, and fuel type. In case of non-compliance enforcement actions may be taken.

The date of entry into force of this legislation has been postponed from 1 January 2024 to 1 July 2024.

ESG Priorisation

The aforementioned legislation highlights the increasing prioritisation of ESG (Environmental, Social, and Governance) issues. It’s not only evident in legislative bodies but also in the broader business and societal landscape, with regulators and interest groups playing an active role. Therefore, having a proactive ESG policy is becoming increasingly important.

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