CSDDD implementation in the Netherlands

On 25 July 2024, the Corporate Sustainability Due Diligence Directive (CSDDD; Directive (EU) 2024/1760) entered into force. This aims to promote sustainable and responsible corporate behaviour within companies’ operations and throughout their global chains of activities. The new rules will require in-scope companies to identify and address adverse human rights and environmental impacts resulting from their activities within Europe and beyond. EU member states have to incorporate the CSDDD into national legislation by 26 July 2026.

Dutch CSDDD implementation proposal

On 18 November 2024, the Dutch consultation on the implementing proposal has started. It is open to companies, industry associations, civil society organisations, and other interested parties. Similar to the CSDDD, this long-awaited consultation reveals a less far-reaching proposal compared to previous proposals for responsible business conduct legislation. Nevertheless, it remains a gamechanger as requirements on the sustainability due diligence process and climate transition plan will be embedded into Dutch law. The Netherlands Authority for Consumers and Markets (ACM) will be designated as supervisory authority, including for financial undertakings.

The Dutch proposal confirms that companies have to adopt, and have a best-efforts obligation to execute, a climate transition plan. The company itself is responsible for its content and the targets set therein. The proposal confirms that it does not introduce stricter requirements than the CSDDD. This means that there is no wider scope: the proposal follows the CSDDD’s restricted approach of the chain of activities for the financial sector. Previous legislative proposals on responsible business conduct contained suggestions to extend the scope and also introduce directors’ liability. The proposal confirms that this is no longer on the table.

Main obligations

The proposal confirms that in-scope companies should:

1. Exercise risk-based due diligence in relation to human rights and environmental topics, aiming to identify actual and potential adverse impacts on these topics. Due diligence must cover companies’ own operations, their subsidiaries’ operations and, in relation to their chain(s) of activities, those of their business partners.
2. Establish and publish a climate transition plan that addresses how the company aligns its business model and business strategy with the transition to a sustainable economy, and with the goal of limiting global warming to 1.5°C in accordance with the Paris Agreement and to achieve climate neutrality by 2050 in line with the European Climate Law, and where applicable, the company’s exposure to coal-, oil-, and gas-related activities. The plan must include time-bound targets for 2030. From 2030, target values shall be set after every five-year period thereafter up to 2050.

For regulated financial undertakings, the Dutch proposal confirms that due diligence is limited to their upstream and own operations (including subsidiaries), but not the downstream part of their chains of activities.

Scope: phased application

The application timeline of the legislative proposal follows the CSDDD (article 6.2 Dutch legislative proposal). The Dutch implementing act will apply:

From 26 July 2027 to EU companies that meet the following requirements in the last financial year preceding 26 July 2027: the average number of employees exceeds 5,000; and the worldwide net turnover exceeds EUR 1,5 billion.

From 26 July 2027 to non-EU companies whose net turnover in the European Economic Area in the financial year preceding the last financial year before 26 July 2027 exceeds EUR 1,5 billion.

From 26 July 2028 to EU companies that meet the following requirements in the last financial year preceding 26 July 2028: the average number of employees year exceeds 3,000; and the worldwide net turnover exceeds EUR 900 million.

From 26 July 2028 to non-EU companies whose net turnover in the European Economic Area in the financial year preceding the last financial year before 26 July 2027 exceeds EUR 900 million.

From 26 July 2029 to EU-companies statutorily established in the Netherlands, meeting one of the following requirements for two consecutive years:

From 26 July 2029: non-EU companies that have a branch office in the Netherlands, meeting one of the following requirements for two consecutive financial years:

1. The net turnover in the European Economic Area exceeds EUR 450 million in the financial year preceding the last financial year.
2. The company is the ultimate parent company of a group that has reached the threshold mentioned in (a) on a consolidated basis in the financial year preceding the last financial year.
3. The company has entered into a franchise or licence agreement in exchange for royalties with an independent third party within the European Economic Area or is the ultimate parent company of a group that has done so.

Non-EU companies and authorised representative

If a non-EU company does not have a branch within the EEA or has branches in different member states, the competent supervisory authority is that of the member state where the company has generated the largest part of the turnover in the EEA and that meets one of the following requirements:

The non-EU parent will have to notify the ACM that it falls in scope of the CSDDD and communicate who it has designated as its authorised representative. The authorised representative will need to cooperate with supervision exercised by the ACM.

Due diligence requirements – annual statement on due diligence 

The legislative proposal contains general and specific articles on the requirement to exercise risk-based due diligence in the areas of human rights and the environment.

In general, a company must take the following steps in order to exercise proper risk-based due diligence (article 2.1.1 Dutch legislative proposal):

• Integrate due diligence into its policy and risk management system
• Identify and assess potential and actual adverse impacts, and, where necessary, prioritise actual and potential adverse impacts
• Prevent and mitigate potential adverse impacts and terminate and, as much as possible, minimise actual adverse impacts
• Provide remediation for actual adverse impacts
• Meaningfully engage with stakeholders
• Establish and maintain a complaints procedure and notification mechanism
• Evaluate and assess the effectiveness of its policy and measures taken for due diligence
• Publish a statement with information on due diligence (either as part of CSRD reporting requirements or separate statement)

The Dutch proposal for example implements the requirements on meaningful stakeholder engagement. It also accounts for cooperation, with reference to the Act on the protection of company secrets and how affected parties may request additional information to be able to effectively cooperate to meet the due diligence requirements together.

Climate transition plan

Companies are required to adopt a climate transition plan in which the corporate model and strategy are aligned with (a) the transition to a sustainable economy; (b) the 1,5 °C target of the Paris Agreement; and (c) where relevant, the exposure of the company to coal-, oil- and gas-related activities.

The plan must contain clear and time-bound targets related to climate change for 2030 and in five-year steps up to 2050 based on conclusive scientific evidence and, where appropriate, absolute emission reduction targets for greenhouse gas for scope 1, scope 2 and scope 3 greenhouse gas emissions for each significant category.

How the corporate model and strategy can be aligned with the aforementioned goals will vary from sector to sector and from company to company. However, for each sector and company, the plan must be compatible with the transition to a sustainable economy and limiting global warming, and be science-based. The European Commission’s guidelines will provide practical guidance at a later stage.

Supervision and enforcement

The Authority for Consumers and Markets (ACM) will be designated as the supervisory authority in the Netherlands. Anyone can submit a substantiated notification to the ACM if there is objective reason to believe that a company is non-compliant with the legislation. Where appropriate, the ACM will cooperate with other (European) regulatory authorities.

The ACM supervises the establishment of the climate transition plan, including the prescribed content according to Article 3.1 and the publication of the climate transition plan, including the progress towards the time-bound reduction targets. The obligation to implement the climate transition plan to the best of one’s ability is not supervised.

Enforcement tools available to the ACM include the binding instruction, order under penalty and an administrative fine of 5% of consolidated worldwide net sales. This means that the Dutch supervisory authority cannot impose higher fines than originally proposed by the European Commission. The proposal does not include criminal law enforcement mechanisms.

Dutch tort rules are not amended by the proposal (except for a prolonged limitation period). This means that civil law claims based on the CSDDD must be brought based on the existing open norms of Dutch tort law (Section 6:162 DCC). For a tort claim, all requirements for civil liability under Section 6:162 DCC must be met.