-Non-paperMandatory due diligence:
Building blocks for effective and ambitious European due diligence legislation

Since the adoption of the OECD Guidelines for Multinational Enterprises and the United Nations
Guiding Principles on Business and Human Rights (UNGPs), significant steps have been taken to
foster business’ respect for people and planet in their value chain. The Netherlands has
consistently been at the forefront of these developments, being one of the first countries in the
world to adopt a National Action Plan on Business and Human Rights and an ambitious policy on
Responsible Business Conduct (RBC). However, Dutch evaluations have shown that although
voluntary measures make a valuable contribution, they have been insufficiently effective at making
global value chains more sustainable. The Netherlands therefore takes the position that human
rights and environmental due diligence legislation – preferably at EU level – is needed. With this
non-paper, The Netherlands sets out how this could be enacted at EU level in order to generate
maximum positive impact in third countries while safeguarding a level playing field for EU
companies.
The Netherlands commends the European Commission for the lead it is taking. In her State of the
Union speech, President Von Der Leyen demonstrated the urgency of the matter with her assertion
that the EU market should be free of products made by forced labour. To tackle this and other
issues related to human rights violations and environmental damage in supply chains, several EU
Member States already have due diligence legislation in place or are in the process of developing
it. However, the initiatives vary widely in their approach, thus making the case for harmonisation
at EU level. In the EU, the Conflict Minerals Regulation is already in force. The time is now to adopt
broad due diligence legislation, covering all risks to people and planet and all sectors throughout
the market. The Netherlands looks forward to a timely Commission proposal for mandatory due
diligence.
The Netherlands has developed building blocks for due diligence legislation, to be put at the
disposal of all parties involved, to help make the upcoming proposal ambitious, effective and
feasible. The building blocks for due diligence legislation cover the scope, the requirements and
the enforcement. Finally, The Netherlands favours embedding due diligence legislation in a
smart mix of policy measures to foster RBC by means of an EU RBC action plan.
Scope
The internationally accepted frameworks for RBC (the OECD Guidelines and UNGPs) apply to all
companies. However in determining the scope of due diligence legislation careful demarcation is
important and should take into account effectiveness and proportionality. The Netherlands
advocates that EU due diligence legislation cover all large companies and listed SMEs in line
with the definition set in the EU Accounting Directive (2013/34/EU). In addition, The Netherlands
favours including medium-sized companies in high risk sectors within the scope, provided
that the sectors labelled “high risk” can be identified objectively and it is clear for companies
whether they are considered part of these sectors or not. For medium-sized companies in high risk
sectors, the requirements should be applied in line with the abovementioned international
frameworks but proportionally to their size, e.g. by applying less detailed requirements. Besides
companies domiciled in the EU, the legislation should also cover companies domiciled outside
the EU that sell goods or services on the EU market, on the precondition that the European
Commission can substantiate (for instance on the basis of research) how EU member states can
practically and legally enforce such an obligation (considering the limitations to extraterritorial
supervision and enforcement, and considering the WTO rules).
The Netherlands favours the introduction of a statutory, general duty of care for all
companies. A statutory, general duty of care sets out that every company has a duty of care to
respect human rights and the environment in the value chain. Unlike the specific requirements
outlined below, the general duty of care would not be enforced through administrative law. A
statutory, general duty of care makes clear that the business community has a duty of care, even
in the absence of specific due diligence requirements. The statutory, general duty of care has the
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nature of a safety net provision and should therefore be formulated in general terms. If a case is
brought against a company, a civil court would have to establish whether the company in question
has indeed violated its duty of care under the specific circumstances of the case, and whether the
company should therefore provide remedy for harm that has occurred as a result.
The Netherlands wishes to underline the importance of measuring the effectiveness of future EU
due diligence legislation, in particular regarding the scope. The measure should therefore allow for
a timely adaptation of the scope if the evaluation gives reason to do so.
Requirements
The Netherlands is of the opinion that EU due diligence legislation ought to be aligned with the
international frameworks for RBC (the OECD Guidelines1 and UNGPs). This implies that the six
step framework of the due diligence process should be included in the requirements. In order
to provide legal certainty to companies, it is important to make these norms as specific as
possible. In addition, the norms should be interpreted proportionally for medium-sized companies
in high risk sectors. This may be done by applying less detailed requirements while safeguarding
alignment with the OECD Guidelines and UNGPs.
The Netherlands stresses the importance of coherence between the upcoming Commission
proposal and the existing and nascent EU legislative instruments which include sectoral or
thematic due diligence obligations, such as the Conflict Minerals Regulation, the Batteries
Regulation which is currently being examined by the Council, and the upcoming legislative
proposal to combat deforestation. A lack of coherence may lead to duplication of obligations or
legal uncertainty for companies.
Enforcement
The Netherlands believes that administrative enforcement of EU due diligence legislation is the
most suitable. The due diligence process is a continuous and flexible process. It includes feedback
loops to ensure learning. Through the due diligence process a company must be able to respond
adequately to change of circumstances. The nature and scope of the due diligence process can also
depend on factors such as the size of the company, the business model, the context of its activities
and its position in the value chain. When designing the enforcement mechanism, these elements
must be taken in to account.
Moreover, the Netherlands believes that enforcement should not primarily focus on sanctions, but
should be aimed at encouraging companies to continuously improve their due diligence. This is
also known as “positive enforcement”. This is all the more important because the (partly) open
norms on which the due diligence process is based require a tailored approach by the regulatory
body. For these reasons, it is important to designate a regulatory body with a wide range of
options for intervention. Obviously, it remains important that the regulatory body is also
empowered to impose sanctions in the event of violations.
In order to safeguard the level playing field within the Union, is it crucial that the due diligence
obligation is enforced uniformly in all Member States. The Netherlands is of the opinion that the
appointment of national competent authorities could have added value since national institutions
are better equipped to oversee the context in which individual companies operate. However, EUwide supervision could benefit the uniformity of enforcement in Member States. The Netherlands
wishes to invite the Commission to consider whether (partially) organising the enforcement at EU
level would be appropriate. In the case of national enforcement, there would be a need for detailed
requirements and guidelines for national regulatory bodies as well as peer review or peer learning
mechanisms among these bodies.
A smart mix of policy measures to foster responsible business conduct
The Netherlands believes that human rights and environmental due diligence legislation should be
embedded within a smart mix of policy measures, as envisaged in the UNGPs. Accompanying
measures should support companies and promote compliance with the due diligence obligation.

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Including the ILO MNE Declaration
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Moreover, accompanying measures should have a reinforcing effect to help maximise the
combined, positive impact in third countries.
A European smart mix of policy measures, preferably by means of an EU Action Plan, would
support the coherent implementation of the OECD guidelines and the UNGPs. Reinforcing
measures will furthermore help prevent fragmentation of services and help alleviate the regulatory
burden on European companies. As has been called upon by EU Member States in Council
Conclusions on Human Rights and Decent Work in Global Supply Chains2, an EU Action Plan should
focus on shaping global supply chains sustainably, promoting human rights, social and
environmental due diligence standards and transparency, while taking experiences and lessons
learned from the COVID-19 pandemic into account. Also, the EU Action Plan should be in line with
the broader EU environmental policy, such as the EU Green Deal. Measures to include in a
European smart mix of policy measures could very well include:
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The scaling up of existing national sectoral initiatives;
The creation of peer-learning structures for member states’ national action plans on
business and human rights (NAPs);
Efforts to promote sustainable trade;
Efforts to improve access to remedy for victims of business-related human rights abuse;
Leveraging the role of the EU as a market actor, for example with regard to EU public
procurement.

In particular, The Netherlands is interested in a European exploration of the potential of sectoral
schemes at EU level, combining forces of the European business community, as a complement to
due diligence legislation in fostering a race to the top. The Commission could consider setting up a
system to assess and recognise such schemes, taking the lessons learned from the Conflict
Minerals Regulation into account. Strict conditions, e.g. in terms of quality and governance, would
have to be met in order for schemes to be recognised. Such schemes should inspire confidence to
the regulatory body that member companies abide by their commitments. Under such
circumstances, recognition of schemes could lead to simplification of the enforcement duties for
regulatory bodies. Under no condition, however, should membership of a sectoral scheme lead to
an exemption of individual company duties under the law.
Furthermore, the Netherlands believes that an EU action plan must at least work towards
coherence and consistency in EU policies with regard to risks to people and planet in global value
chains. Measures to support the implementation of the UNGPs and the OECD Guidelines could be
complemented with appropriate development cooperation instruments and external policy
measures in order to encourage both companies and governments in production countries to
address value chain risks. The Netherlands would like to recall and urge the European Commission
to launch an EU Action Plan in line with the aforementioned Council Conclusions.

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st13512-en20.pdf (europa.eu)
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