Draft bill on the implementation of the CSDDD (WIVO) published

CSDDD

The CSDDD requires, among other things, that certain large companies in the EU and abroad establish due diligence policies to identify, prevent, mitigate and ultimately eliminate the negative impacts on human rights and the environment of their business activities, their subsidiaries, and certain other companies related to their value chain. These companies are furthermore required to develop and implement a transition plan to ensure that the company does its utmost to align its business model and strategy with the transition to a sustainable economy and mitigate global warming and climate change (the “Climate Transition Plan”).^[1]

We have previously written about the obligations under the CSDDD and its scope, enforcement, and phased entry into force: see our Corporate Alert of 8 July 2024.

CSDDD – FAQ and delegated acts and guidelines

The European Commission has published a FAQ on the operation of the CSDDD (the “FAQ”). This FAQ covers subjects such as the scope of application, the various obligations, enforcement under the CSDDD, and concurrence with, for example, the European Corporate Sustainability Reporting Directive (“CSRD”).

The European Commission will issue delegated acts and guidelines in the upcoming years, for example on (i) the content requirements of the Climate Transition Plan; (ii) voluntary model contract clauses that companies can use to require their business partners to comply with their code of conduct and other measures adopted under the CSDDD; and (iii) information for stakeholders and their representatives on how they can be involved in the due diligence process (stakeholder engagement). 

Implementation of the CSDDD

The CSDDD entered into force on 25 July 2024. Member States have until 26 July 2026 to implement the CSDDD into national laws and regulations. The WIVO will (probably) enter into force on 26 July 2026 (Article 6.5(1) of the WIVO).

The implementation of the CSDDD will be unencumbered. This means that the WIVO contains only the provisions necessary to implement the European directive. Moreover, the legislature has stated that possible extra work and costs for Dutch companies and for the regulator have been minimised where possible. Further clarifying rules can be laid down in an order in council. 

Phased entry into force of the WIVO

The entry into force will be phased. From 26 July 2027, the first group of companies with more than 5,000 employees and a turnover of more than €1.5 billion will have to comply with the WIVO.

Outlines from the WIVO

The main points of the WIVO are the following: ^[2]

• In scope companies must take human rights and the environment into account. They must conduct risk-based due diligence on human rights and environmental protection, ^[3] with the aim of identifying, preventing, mitigating or stopping actual and potential negative impacts on these issues. The due diligence must cover the company’s own activities, the activities of its subsidiaries and, in relation to its chain(s) of activities, those of its business partners.

• In scope companies must prepare and publish a Climate Transition Plan. The Climate Transition Plan must address how the company aligns its business model and business strategy with the transition to a sustainable economy and with limiting global warming to 1.5°C in line with the Paris Agreement. The business model and business strategy must also be in line with European Climate law to achieve climate neutrality by 2050 and, if applicable, the company's exposure to coal, oil and gas related activities. The plan must include time-bound targets for 2030. From 2030 onwards, targets will be set at the end of each five-year period up to 2050.

• The regulatory authority in the Netherlands, also for the financial sector, is the Netherlands Authority for Consumers and Markets ("ACM"). The ACM's supervisory and enforcement powers extend to the due diligence obligations of the WIVO and the provisions on the Climate Transition Plan, apart from the obligation to implement the Climate Transition Plan (Article 3.3 WIVO). Among other things, the WIVO gives the ACM the power to impose administrative sanctions for non-compliance, including fines of up to 5% of a company's annual turnover. The competent administrative courts are the District Court of Rotterdam and the Trade and Industry Appeals Tribunal.

• Dutch tort law will not be changed, except for some additional rules for the purpose of enforcement. The WIVO does not propose to change the rules in the Dutch Civil Code. This means that civil claims under the WIVO must be based on the existing open norms of Dutch tort law (Article 6:162 of the Dutch Civil Code). An extended limitation period is proposed for certain situations.

• There is no (separate) provision for criminal enforcement.^[4]

• Companies may cooperate with other companies to ensure compliance and, under certain conditions, share resources and information with each other. 

The WIVO encourages cooperation between companies. Under certain conditions, companies may share resources and information to jointly meet their obligations. This is particularly important when addressing complex challenges such as environmental degradation in global supply chains, where coordinated efforts can lead to more effective solutions.

Other ICSR initiatives 

It is proposed to repeal the Dutch Child Labour Due Diligence Act (Article 5.1 WIVO).

The proposed Responsible and Sustainable International Business Conduct Act (the “Initiative Bill”) – with the same objective as the CSDDD – is still pending before the Lower House. The legislature believes that the WIVO is in line with the wishes of the initiators of the Initiative Bill. The lessons learned from the research and advice sought during the drafting of the Initiative Bill have been incorporated into the legislative process, such as in the design of the (open) norms, monitoring, enforcement, and protection of personal data.