In this third blog of the ESG blog series, Stephanie ter Brake discusses which ESG legislation companies need to comply with.
Read the entire blog below
There are certain laws on ESG-related issues that companies already have to comply with, such as environmental legislation. The Netherlands has the Environmental Management Act (Wet milieubeheer), which includes a legal ground for environmental liability. Under this law, any company that carries out an activity (or is the perpetrator of an incident) that causes or threatens to cause environmental damage, is liable. This means that the company must take measures to prevent environmental damage. If environmental damage does occur, the company must take all necessary measures to minimise that environmental damage. And if there is permanent damage, the company must ensure that the environmental damage is repaired as much as possible and pay all costs for it. Another example is the Dutch Working Hours Act (Arbeidstijdenwet), which includes the prohibition of child labour and other labour exploitation. Also, under the equality and non-discrimination principles, companies are not allowed to discriminate, so they will have to treat (potential) employees equally in equal circumstances. Which specific laws and regulations companies have to comply with obviously differ from company to company.
Generally, the already existing corporate ESG law looks at the actions and omissions of the company itself. However, both at European and national level, legislation is in the pipeline requiring large companies to look beyond their own business. They must then check whether there is also no environmental damage or child labour in the supply chain. This is necessary because most human rights and environmental violations take place in countries where no (adequate) action is taken against them and/or victims find it difficult to go to court. Think of big clothing brands that have clothes made by factories in China. At European level, therefore, the draft Corporate Sustainability Due Diligence Directive (CSDDD) was released, under which large companies must also monitor compliance with human rights and environmental laws elsewhere in the value chain. Member states will eventually have to implement legislation on this basis. Moreover, large companies will soon have to report on sustainability issues under the Corporate Sustainability Reporting Directive, or CSRD.
In the Netherlands, supply chain legislation is also in the pipeline. In 2019, for instance, the Child Labour Duty of Care Act(Wet zorgplicht kinderarbeid) was passed. Under this Act, companies selling goods or services must prevent that they were made with the help of child labour. In 2021, the bill on Responsible and Sustainable International Business Act (Wetsvoorstel verantwoord en duurzaam international ondernemen) was proposed. Under this bill, companies must prevent human rights and environmental violations when engaging in foreign trade. This bill has attracted a lot of criticism (most famously from Boskalis CEO Peter Berdowski) and seems to be off the table for now. Eventually, a similar law will still have to be passed, implementing the CSDDD.
Click here for the previous blog or visit our ESG theme page on our website for more information on this topic.
Stephanie ter Brake
