Background
The Dutch Child Labour Due Diligence Act obliges companies to examine whether their goods or services have been produced with child labor, and if so, mitigate and prevent child labor in their supply chain.
The Act was one of the first Due Diligence laws in the EU region, specifically targeting human rights. Adopted in 2019 by the Dutch Senate, it is currently still on hold as of October 2024. Its status is pending on the EU Corporate Social Due Diligence Regulation (CS3D) outcome to avoid overlap with this broader EU directive, which contains more comprehensive due diligence requirements. Government of the Netherlands is now reconsidering the Act’s timeline and specific provisions.
Who is concerned?
The Act applies to all companies selling or supplying goods or services to Dutch consumers, no matter where it is based or registered, with no exemptions for legal form or size. The Act primarily focuses on Dutch and foreign companies that consistently do business with Dutch consumers, not unregistered foreign companies that sell goods or services less than twice in a calendar year.
Requirements
Under the Act, firms are required to conduct the following to exercise due diligence:
- Investigate their supply chains to identify any suspicion of child labor
- Draft and implement a plan of action to terminate child labor if identified from the investigation
- Create an action plan to avoid the use of child labor
- Submit a declaration to the yet-to-be-determined regulatory body, affirming that they have exercised an appropriate level of supply chain due diligence to prevent child labor.
Companies will have six months from the aw's effective date to submit the required documentation demonstrating compliance with the statute.
Consequences
Non-compliance with the Act will be overseen through complaints against offending companies registered by victims, consumers and other stakeholders. In other words, no active investigations will be conducted by the regulator until sufficient evidence is presented. The regulator only begins an investigation once evidence is presented to make a determination if a violation of the law has been made by the company, and provide a legally binding course of action. It is one of the first criminal enforcement tools in the field of business and human rights.
There are significant administrative fines and criminal penalties for non-compliance:
- Fines for failing to file a declaration from €4,350
- Companies that fail to comply can be subject to fines of up to €870,000 or 10% of total global revenue
- If a company receives two fines within five years, the responsible company director is liable for up to two years of imprisonment under the Economic Offences Act
- Penalties increase exponentially for companies found to have inadequate due diligence or lack of an appropriate plan of action to detect and prevent the use of child labor.
Risk Mitigation
To mitigate the risk of penalties and fines, companies should prioritize developing a comprehensive supply chain profile to gain visibility from raw materials to finished goods—a step made easier with the TrusTrace platform. Although the Dutch Child Labour Due Diligence Act is delayed, it remains essential to start collecting relevant data now in preparation for the EU Corporate Sustainability Due Diligence Directive (CSDDD). This proactive approach will not only address future compliance requirements but also reduce the risk of non-compliance as harmonization among regulations progresses, minimizing potential duplication of efforts.
About TrusTrace
TrusTrace offers actionable transparency across your entire supply chain, streamlining compliance, managing supply chain risks, and facilitating credible product origin communication. Contact us to learn how we can support your company in this critical compliance journey!
