In recent years, increasing attention has been focused on responsible business conduct and more consumers want insight into the origin and production method of the products they buy. Combating child labour is one of the regular subjects of discussion. For example, in December 2019, Apple, Alphabet, Microsoft, Dell and Tesla were sued in the United States by the human rights organisation International Rights Advocates for allegedly collaborating in the extreme abuse of children in the extraction of cobalt in the Democratic Republic of Congo.
In the cocoa industry, a number of companies are moving towards more sustainable production chains, but are asking for help from the European legislator. In December 2019, chocolate producers Mars Wrigley (Mars, Snickers, M&M) and Mondelez (Milka, Toblerone), together with four other parties, sent an open letter to the EU arguing for European legislation in order to place human rights and environmental due diligence requirements on all companies supplying cocoa products to the European market. This would create a level playing field for all companies in the cocoa industry and would prevent child labour.
To date, there has been no European legislation applicable to companies as regards child labour, but a number of EU countries, such as the United Kingdom and France, have taken a step in this direction at national level. In the Netherlands, too, a similar movement to combat child labour has been set in motion by the Dutch Child Labour Due Diligence Act (Wet zorgplicht kinderarbeid). This blog discusses this act and its possible consequences for companies.
Child Labour Due Diligence Act
The private member's bill for the Child Labour Due Diligence Act was adopted by the Senate in May 2019 and brings with it – briefly stated – a due diligence obligation for companies to prevent child labour in their production chain. The act is unlikely to enter into force before 2022, but may already be relevant to companies that (will) fall within the scope of the act.
The act imposes an obligation on any company (including foreign companies) supplying goods and services to end users in the Netherlands to exercise due diligence in order to prevent these goods or services from having been created with the aid of child labour. The company must issue a declaration to the regulator stating that it is exercising due diligence. The identity of this regulator will be apparent from the order in council (AMvB) in which the act will be further detailed.
In the event of a violation of the act, and after submission of a complaint by an interested party and imposition of a binding instruction by the regulator, administrative fines of up to EUR 870,000 or 10% of the annual turnover can be imposed. If, after an administrative fine, the company commits the same offence again within five years on the instructions of or under the actual management of the same director, its director(s) (and possibly the company itself) can be prosecuted.
With regard to the interpretation of the term 'due diligence', it follows from the act that the company must (i) investigate whether there is a reasonable suspicion that the goods or services to be supplied have been created using child labour, and (ii) if there is such a reasonable suspicion, adopt and implement a strategic plan to take action where necessary. The obligation to investigate refers to sources that are reasonably known to and can readily be consulted by the company. The order in council will lay down the further requirements for the investigation and the strategic plan. These will be based on the ILO-IOE Child Labour Guidance Tool for Business, which provides practical guidelines for companies to combat child labour in the supply chain in line with the UN Guiding Principles on Business and Human Rights. It therefore seems plausible that the due diligence will be further shaped in the order in council along the lines of the following step-by-step plan referred to in the Guidance Tool:
- Develop a policy commitment regarding the prevention of child labour and embed it throughout the organisation.
- Identify and assess the risk of child labour in the production chain.
- Take action to stop, prevent or reduce child labour.
- Monitor the effectiveness of the policy and the approach.
- Communicate on how child labour is being tackled.
- Involve stakeholders (injured parties, NGOs, public authorities) to gain a better understanding of the impact of the actions undertaken.
- Ensure or contribute to remedial measures where necessary.
The essence of this step-by-step plan can also be found in other international guidance on corporate social responsibility, such as the OECD Guidelines for Multinational Enterprises (and the associated OECD Due Diligence Guidance for Responsible Business Conduct). The order in council will also be aligned with (the Dutch) Agreements promoting International Responsible Business Conduct (IRBC agreements) that companies, public authorities, trade unions and civil society organisations have agreed on in a number of sectors, such as the food and textile sector. The Minister for Foreign Trade and Development Cooperation indicated in October 2019 that an evaluation of the IRBC agreements would start in November 2019. The final report is expected to be delivered before the 2020 summer recess. The results of this evaluation will then be included in the order in council in which the Child Labour Due Diligence Act will be further detailed.
Pending the evaluation of the IRBC agreements and the drafting of the order in council, which will be submitted to both the House of Representatives and the Senate, the entry into force of the Child Labour Due Diligence Act will therefore take some time (expected in mid-2022). Nevertheless, it may already be important for companies to make an assessment as to whether they may fall within the scope of the act and what the possible impact on the company will be. It is vital in the first instance to identify in good time the risks of child labour in the production chain, and where necessary to implement or tighten effective policy (also on the basis of the order in council ) on the prevention of child labour, before the act actually enters into force. This may also be relevant if the company itself does not fall within the scope of the act, but its customers do. In that case, the company may eventually – under pressure from (indirect) customers who do fall within the scope of the act – also have to ensure that child labour in the production chain is combated.
However, it is also vital in the second instance to assess whether the company falls within the scope of the act because the act provides for a transitional arrangement, which suggests that the act applies to the supply of goods or services for which the commitment was entered into after 13 November 2019 (the date of the Bulletin of Acts and Decrees in which the act is published). It therefore seems that companies that are currently entering into (long-term) commitments to supply goods or services should already take account of the act. Although the further detailing and interpretation of the act is still pending, it may therefore be advisable – depending on the company's risk profile – to make a preliminary assessment of the possible future impact of the act.
If you have questions about the Child Labour Due Diligence Act or the possible impact of the act on your company, do not hesitate to contact us.