Background
The Dutch Child Labour Due Diligence Act was adopted in 2019 by the Dutch Senate. However, in order for companies to prepare and fully investigate their supply chains, it is not expected to come into effect until mid-2022. The law obliges companies to examine whether their goods or services have been produced with child labour, and if so, mitigate and prevent child labour in their supply chain.
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 in order to exercise due diligence:
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Investigate their supply chains to identify any suspicion of child labour
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Draft and implement a plan of action to terminate child labour if identified from investigation
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Create an action plan to avoid the use of child labour
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Submit a declaration to the yet-to-be-determined regulatory body, affirming that they have exercised an appropriate level of supply chain due diligence in order to prevent child labour
Companies will have six months from the Law's effective date to submit the required documentation demonstrating compliance with the statute.
Consequences
Non-compliance with the Act will be overseen through complaints with offending companies by victims, consumers and other stakeholders. That is, no active investigations will be conducted by the regulator. If sufficient evidence is presented, the regulator can determine that a violation of the law has been made by the company and provide a legally binding course of action. Therefore, 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:
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Fines for failing to file a declaration from €4,350
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Companies that fail to comply can be subject to fines of up to €870,000 or 10% of total global revenue
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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
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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 labour
Risk Mitigation
In order to mitigate the risk of penalties and fines, companies should develop a comprehensive supply chain profile, to understand the entirety of the supply chain, from raw materials to finished goods, which can be achieved with the TrusTrace platform. TrusTrace provides actionable transparency of your entire supply chain and makes it easier to manage compliance, supply chain risk and communicate product origin easily and credibly. Contact us for more information on how we can help your company.
