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Climate – the law governing operations that emit Greenhouse Gases (e.g. carbon trading) is addressed by Environment and Climate Change international guides, in respect of ESG: a. Is there any statutory duty to implement net zero business strategies; b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated; c. Have there been any test cases brought against companies for undeliverable net zero strategies; d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?
a. Is there any statutory duty to implement net zero business strategies;
While the Netherlands ratified the 2015 Paris Agreement, and enshrined national emission reduction targets in Dutch statutory law (Klimaatwet), no laws have been passed that specifically require business to take on net zero commitments or adopt a transition strategy. As a starting point, a company’s corporate strategy, including on matters of sustainability, is for the management board to develop.
Nonetheless, the scope of Dutch companies’ legal responsibilities in the context of climate change has come under scrutiny in the wake of changing public opinion on companies’ role in combating climate change, at the global, European and Dutch level. We see a shift in how the role and responsibilities of companies and their boards is perceived by e.g. NGOs. The concept that corporate accountability extends beyond corporate or group confinements, is gaining traction. The way in which companies can be compelled or nudged towards playing their part in the transition towards a sustainable economy, has sparked intensive debate. Although some European and Dutch legislative proposals on matters of corporate sustainability were watered down or altogether abandoned, there seems to be a push to increase accountability for companies’ sustainability policies and efforts, and far-reaching European legislation has been adopted.
The first major step has been taken with the introduction of the Corporate Sustainability Reporting Directive (“CSRD“) by the EU. Among other things, the CSRD introduced reporting requirements for in-scope companies regarding their plans and implementing actions to ensure that their business model and strategy are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement and with the objective of achieving climate neutrality by 2050 as established in the European Climate Law (Regulation (EU) 2021/1119), and, where relevant, the exposure of the undertaking to coal-, oil- and gas-related activities. While this may seem like an implicit requirement to develop and implement specific plans and actions regarding climate change, the CSRD’s recitals refer to transition plans “they may have“, entailing that the CSRD’s reporting obligations as such do not require companies to adopt a plan. The European Sustainability Reporting Standards (“ESRS“) developed by the EFRAG as delegated acts to the CSRD support this notion. The CSRD will be implemented in the Netherlands by: (i) an act covering the rules on assurance of CSRD reports and the CSRD’s applicability to listed companies, and (ii) a decree on disclosure requirements for in-scope companies, rules on the assurance statement and the audit committee, and implementation timelines. The Dutch government has chosen binding CSRD implementation, without national top-ups.
Under the European Union Emission Trading System (“EU ETS“) Directive, operators of installations with GHG emissions higher than the 80th percentile of emission levels for the relevant product benchmarks must adopt a climate neutrality plan. The Annex to the EU ETS Directive sets outs the requirements for what these plans should include: (1) general information; (2) data on historical emissions; (3) data requirements for historical emissions and targets reported; (4) milestones and targets; and (5, 6, 7) requirements for milestones and targets as well as measures and investments. However, we believe these plans serve as an asset-based climate plan rather than an entity or group-based climate plan.
The upcoming Corporate Sustainability Due Diligence Directive (“CSDDD“) takes company’s climate responsibilities one step further. The Council-approved CSDDD introduces rules for in-scope companies to adopt and implement a climate transition plan aimed at ensuring, through best efforts, that their business model and strategy are compatible with a transition to a sustainable economy and the limiting of global warming to 1.5 °C in line with the Paris Agreement and with the objective of achieving climate neutrality as established in the European Climate Law (Regulation (EU) 2021/1119). The plan should address the company’s interim and 2050 climate-neutrality targets and, where relevant, its exposure to coal, oil and gas-related activities. Last, imminent amendments to the Capital Requirements Directive will likely introduce mandatory climate transition plans focused on adaptation measures for in-scope financial undertakings, predominantly banks.
In addition, in the landmark Shell judgment by the District Court of The Hague (discussed further below under 1.c.), the court derived an obligation for Shell to reduce its emissions from this unwritten duty of care on the basis of the Dutch open tort norm (article 6:162 DCC). In establishing Shell’s duty of care, the court considered various soft-law instruments like the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights to arrive at an emission reduction obligation for Shell.
b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated;
The use of carbon offsets involves compensating for a company’s emissions by reducing emissions elsewhere or removing CO₂ from the atmosphere. Besides the EU ETS mentioned in 1.a. above and the Efforts Sharing Regulation , no specific regulation exists in the Netherlands on the use of carbon offsets to meet net zero commitments, and their use remains controversial. It is advisable for companies that using carbon offsets to reach their publicly disclosed targets to communicate clearly on how these targets will be reached and how many and what kind of carbon offsets are used.
No standardisation currently exists for carbon offsetting (or similar instruments like carbon removals and carbon storage), which makes it difficult to assess whether these methods are adequate in achieving meaningful net GHG emission reductions (and therefore whether net reduction targets relying on these methods to compensate gross GHG emissions are actually met). An excessive reliance on carbon removals, carbon offsetting, or any comparable instruments, will likely be heavily scrutinised by climate activists and NGOs, and may trigger greenwashing complaints, as illustrated by a recent case against international dairy company Arla before the Dutch Advertising Code Committee.
c. Have there been any test cases brought against companies for undeliverable net zero strategies;
The Netherlands is a key battleground jurisdiction for NGOs and climate activists. So far, judgments have been handed down in two landmark climate cases. In 2019, the Supreme Court ruled in the Urgenda case that the Dutch State had to reduce its emissions by 25% by the end of 2020, against baseline year 1990.
Subsequently, in the ongoing case brought by a number of NGOs including Friends of the Earth Netherlands, against Shell, the District Court of The Hague issued a landmark decision in which it ordered Shell to reduce its Scope 1, 2 and 3 emissions by 45% by the end of 2030, against baseline year 2019. While not included in the operative part of the judgment, the District Court considered with regard to Scope 1 and 2 emissions that Shell had an obligation to achieve a certain result, while its Scope 3 emissions reduction obligation was a “significant best-efforts obligation”. The judgment is currently under appeal.
On 11 January 2024, Greenpeace and eight inhabitants of the Dutch Caribbean municipality of Bonaire brought a claim against the Dutch state, seeking an order requiring the state to step up its carbon emission reduction efforts, among other things. A week later, on 19 January 2024, Friends of the Earth Netherlands announced that it would launch a fourth climate case in the Netherlands, this time against Dutch financial institution ING.
Additionally, the Dutch Advertising Code Committee (Reclame Code Commissie – “RCC“), a committee overseeing compliance with Dutch advertising laws, has issued strict decisions on misleading sustainability claims. The threshold to bring complaints before the RCC is low. Climate activists and NGOs are therefore using the RCC as a stepping stone towards full-blown civil liability cases. For instance, a recent case between Royal Dutch Airlines KLM and NGO FossielvrijNL was preceded by an RCC ruling that certain of KLM’s sustainability claims were misleading. Companies can mitigate risks by ensuring that clear, substantiated and concrete communication regarding their climate action does not omit relevant information, as the proposed EU Green Claims Directive also suggests.
d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?
Apart from the Shell case mentioned under 1.c., no such cases have been brought in the Netherlands.
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Biodiversity – are new projects required to demonstrate biodiversity net gain to receive development consent?
No. The EU has longstanding biodiversity directives which require member states to preserve ecosystems, but do not specifically require them to restore those systems. These directives have been implemented in national legislation (in particular the Dutch Environment and Management Act (Wet Milieubeheer)). Under the current legal regime, environmental impact assessments need to be made at project level when they are likely to have a significant negative impact on habitats or species, either individually or in combination with other plans or projects. Competent authorities will only agree to the plan or project after they have ascertained that it will not adversely affect the integrity of the site concerned. As mentioned before, these rules do not imply biodiversity net gain requirements. However, this may change in the future. In 2023, the European Parliament and the EU Council reached a provisional agreement on the proposal for the EU Nature Restoration Regulation which will require member states to take nature restoration measures. In 2024, the text was adopted by the European Parliament, but rejected by the EU Council. The proposal as such is off the table but will be back on the agenda and may impact project requirements.
We note that under the Corporate Sustainability Reporting Directive, companies may need to disclose information on their biodiversity policy if the double materiality test shows that this topic is material to the company. If material, ESRS E4 Biodiversity and Ecosystems sets out the obligations on companies to disclose information concerning their biodiversity policies and how they implement biodiversity mitigation measures (see Article 19(b)) of the ESRS E4).
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Water – are companies required to report on water usage?
Yes. Under the Corporate Sustainability Reporting Directive, companies may be required to disclose information on their water use and their water resources. If required, ESRS E3 Water and Marine Resources focuses on water and marine resources as one of the twelve European Sustainability Reporting Standards (“ESRS“) (see Annex I of the ESRS Commission Delegated Regulation) and provides specific obligations for disclosing a company’s impact and dependencies on freshwater and marine resources.
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Forever chemicals – have there been any test cases brought against companies for product liability or pollution of the environment related to forever chemicals such as Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS)?
Yes. PFAS pollution is a topic in the Netherlands that is receiving much attention in the legal sector in terms of liability (in public as well as in private law), and criminal prosecution. For example, in 2023, the Dutch state held the Belgian company 3M liable for PFAS pollution of the Western Scheldt. And there have also been two civil lawsuits concerning PFAS-related pollution. In the first, municipalities and provincial authorities sought to hold the company liable for polluting their properties (partly granted). The same company is currently being criminally investigated for PFAS pollution. In the second matter concerning PFAS, a neighbouring company (the claimant) is seeking an injunction to stop another company’s operations, partly to protect the health of its own employees. Apart from these matters, companies can be held liable under public law for serious soil contamination with PFAS, requiring them to remediate the contamination. There are several pending lawsuits on this topic.
We note that the Netherlands, together with Germany, has also played a leading role in the European Chemicals Agency proposal to ban PFAS under the REACH Regulation. This proposal is under consideration.
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Circularity – the law governing the waste hierarchy is addressed by the Environment international guide, in respect of ESG are any duties placed on producers, distributers or retailers of products to ensure levels of recycling and / or incorporate a proportionate amount of recycled materials in product construction?
Yes. For recycling purposes, the Waste Framework Directive, and the Packaging Directive provide for extended producer responsibility based on the polluter pays principle. Under EU law, extended producer responsibility applies in many pieces of legislation, such as: the Waste from Electric and Electronical Equipment Directive (“WEEE“); the Batteries Regulation; the End-of-Life Vehicles Directive; and the Single-Use Plastics Directive. Under the Waste Framework Directive, the producer is responsible for the financing of collection, recycling and responsible end-of-life disposal of WEEE, batteries, accumulators and vehicles and certain single-use plastics. In the Netherlands, these obligations can be fulfilled individually as well as collectively. For many products, the government has determined that producers and importers who import or market the product in the Netherlands must pay a waste management levy to the responsible collective organisation via a generally binding declaration (algemeen verbindend verklaring). Waste management subjects include car tyres and cars, portable batteries, electrical equipment, packaging, paper and cardboard, and flat glass. A similar system will also be introduced for textiles.
Other legislative initiatives worth mentioning are EU initiatives concerning ecodesign and the right to repair, as well as the Raw Materials Act (that is, the Ecodesign for Sustainable Products Regulation; the Directive on Common Rules Promoting the Repair of Goods; Regulation Establishing a Framework for Ensuring a Secure and Sustainable Supply of Critical Raw Materials). The Ecodesign regulation introduces minimum standards in product development to make nearly all products on the EU market sustainable, durable, and eco-friendly. The Directive on the right to repair guarantees the right of consumers to have products repaired and promotes repairing over throwing away and buying new products. The Raw Materials Act will require member states to adopt and implement measures on circularity, particularly regarding waste streams with high critical raw-material recovery potential.
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Plastics – what laws are in place to deter and punish plastic pollution (e.g. producer responsibility, plastic tax or bans on certain plastic uses)?
Yes. See our answer to question 5 for the general framework of management. At the EU level, several specific legal frameworks are in place to deter companies from using microplastics, packaging, and single-use plastics (including the Single-Use Plastics Directive, the Packaging Directive, and the Plastic Bags Directive). These frameworks address outright bans, changes in product design, taxation and extended producer responsibility.
The Single-Use Plastics Directive requires extended producer responsibility schemes for certain types of packaging, such as takeaway food containers, packets and wrappers, plastic drinks container and drink cups including covers and lids. The producers of wet wipes, balloons and tobacco products also have to cover certain costs, including for awareness-raising measures and for the cleaning up of litter. The directive also foresees a levy on packaging, calculated according to the weight of non-recycled plastic packaging waste at a rate of EUR 0.80 per kilogram. Finally, the directive also bans single-use plastic plates, cutlery, straws, balloon sticks and cotton buds, cups, food and beverage containers made of expanded polystyrene, as well as all products made of oxo-degradable plastic in the EU market. Tethered bottle caps for plastic bottles will become mandatory on 3 July 2024. From 2025, PET drinks bottles will need to contain at least 25% recycled plastic and 30% recycled plastic from 2030. All obligations have been or will be implemented in the Dutch Packaging Decree and ministerial degrees based thereupon.
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Equality Diversity and Inclusion (EDI) – what legal obligations are placed on an employer to ensure equality, diversity and inclusion in the workplace?
In addition to rules and regulations with a “soft” character (such as encouraging non-obligatory tools to measure cultural diversity within large companies), there are several acts that place obligations on employers to ensure equality, diversity and inclusion in the workplace. The most important acts are the General Act on Equal Treatment (Algemene wet gelijke behandeling); the Act on Equal Treatment of Men and Women (Wet gelijke behandeling mannen en vrouwen); the Act on Equal Treatment Regarding Disability and Chronic Illness (Wet gelijke behandeling inzake handicap en chronische ziekte); and the Act on Equal Treatment Regarding Age (Wet gelijke behandeling op grond van leeftijd). This legislation seeks to implement (many of) the non-discrimination regulations established within the European Union, and mainly contain negative obligations (that is, obligations that prohibit employers from displaying certain types of discriminatory behaviour). In addition to these specific statutory obligations, the general norm of being a good employer (article 7:611 of the Dutch Civil Code) forces employers to actively ensure that the principles of equality, diversity and inclusion in the workplace are adhered to.
The Dutch parliament recently discussed various bills on equal opportunity in recruitment and selection processes (Wet toezicht gelijke kansen bij werving en selectie). This bill was specifically targeted at combatting the discrimination of workers with a migration background and older people, and gave the Labour Inspectorate (Arbeidsinspectie) supervisory powers over the presence and application of a method to recruit and select workers based on ensuring equal employment opportunities. On 26 March 2024, the Dutch Senate rejected this proposal. Although these obligations will not come into effect in the short term, it does indicate that the issue is on the legislature’s agenda.
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Workplace welfare – the law governing health and safety at work is addressed in the Health and Safety international guide, in respect of ESG are there any legal duties on employers to treat employees fairly and with respect?
The main rule under Dutch law is that the employer must make efforts to ensure a safe working environment for all employees. If an employee suffers damage to his or her health as a result of a circumstance at work, this may fall within the scope of the employer’s liability. The Dutch Working Conditions Act (Arbeidsomstandighedenwet) requires employers to protect employees from psychosocial workload/pressure. This includes harassment in all forms (including sexual), bullying and intimidation. Employers are required to establish and implement a policy aimed at preventing or limiting harm arising in the course of employment. The employer must develop a policy on working conditions and establish a policy on risk inventory and assessment. The employer must also appoint a prevention officer.
Finally, the Confidentiality Persons Act (Wet Vertrouwenspersoon) entered into force on 1 January 2024. This law requires every employer with more than 10 employees to appoint an internal or external confidential adviser to advise employees facing work-related issues.
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Living wage – the law governing employment rights is addressed in the Employment and Labour international guide, in respect of ESG is there a legal requirement to pay a wage that is high enough to maintain a normal standard of living?
The Minimum Wage and Minimum Holiday Allowance Act (Wet minimumloon en minimumvakantiebijslag) has been in effect in the Netherlands since 1968. This law requires employers to pay a minimum wage, the aim of which is to ensure that employees receive a wage (and holiday allowance) that can be regarded as a socially acceptable remuneration for work performed under the employment relationship, also with regard to the general welfare of society. For minors, a minimum wage is regulated by the Minimum Youth Wage Decree (Besluit Minimumjeugdloon).
As of January 2024, the minimum wage increased by 3.75%. As the minimum wage is often discussed in the political arena, especially with regard to the issue of adequate social security (bestaanszekerheid), the higher cost of living, and inflation, it is likely that the minimum wage will go up again in the near future.
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Human rights in the supply chain – in relation to adverse impact on human rights or the environment in the supply chain: a. Are there any statutory duties to perform due diligence; b. Have there been any test cases brought against companies?
a. Are there any statutory duties to perform due diligence;
At present, there is no Dutch legal requirement to conduct due diligence on adverse human rights and environmental impacts in the value chain. However, the pending Corporate Sustainability Due Diligence Directive (“CSDDD“), if and when approved and published, will of course impose a statutory due diligence obligation on certain Dutch companies. There are also other European initiatives (for example, the Deforestation Regulation and the Conflict Minerals Regulation) that impose due diligence obligations. New Dutch initiatives are also being prepared, but whether they will actually be enacted remains to be seen.
The Dutch Child Labour Due Diligence Act (Wet Zorgplicht Kinderarbeid – “WZK“) requires every company established in the Netherlands and every non-Dutch company providing or selling goods or services to Dutch end-users to declare that it will exercise due diligence in accordance with the WZK to prevent these goods or services from being produced with the aid of child labour. The due diligence requirements include a duty to investigate and, where reasonable grounds exist for suspicion, to adopt and implement an action plan. The WZK was enacted in 2019 but has not yet come into force – and there is no indication if it will even come into effect in the future. In any case, subordinate legislation will be required. However, the Initiative Bill on Responsible and Sustainable International Business Conduct (Wetsvoorstel Verantwoord en Duurzaam Internationaal Ondernemen – “WVDIO“) (see below) contains a provision to repeal the WZK, as the WVDIO covers the same requirements with its broad scope.
The second legislative initiative is the WVDIO. The sponsors of the WVDIO aim to establish a minimum hard-law standard for corporate social responsibility, inspired by the soft-law OECD Guidelines for Multinational Enterprises. To this end, the WVDIO includes: (i) a general duty of care regarding adverse impacts on human rights and the environment for “all” Dutch companies; and (ii) a detailed obligation for certain large Dutch companies that perform activities in a country outside the Netherlands, to exercise due diligence, including in their value chains. The due diligence obligations also apply to large foreign (non-Dutch) companies that perform activities in a country outside the Netherlands, and that have a substantial link with the Netherlands, as evidenced by a branch in the Netherlands or the number of customers or activities in the Netherlands. The WVDIO is pending in the Dutch House or Representatives. The bill’s sponsors hope that it will come into effect on 1 July 2024, with several provisions being phased in at a later date. Its enactment, however, and the timing of its applicability are highly uncertain. With the Dutch election results, the political future of the bill is not clear.
It remains to be seen how the CSDDD at the EU level will affect the future of the WZK and the WDVIO, and how the CSDDD and the Dutch initiatives might interact.
Apart from possible future statutory obligations, certain due diligence obligations can be derived from the Dutch Corporate Governance Code as updated in December 2022 (the “2022 Code“), where sustainability has been explicitly included. As of 2023, listed companies are to be guided by the principle that “the management board is responsible for, among other things, sustainable long-term value creation“. The term “sustainable” has been added to the former wording. Certain due diligence obligations can be derived from the phrase “the management board takes into account the impact the actions of the company and its affiliated enterprise have on people and the environment” as contained in Principle 1.1 of the 2022 Code. In the view of the Corporate Governance Code Monitoring Committee, this wording is more in line with the Corporate Sustainability Reporting Directive and the CSDDD than what was included in the consultation document on the update. The Code is a soft law instrument of a comply-or-explain nature and only directly applicable to listed companies. It therefore does not impose legal obligations, although courts have used it as inspiration to impose binding obligations on other companies as well.
b. Have there been any test cases brought against companies?
There are no recent cases in the Netherlands that specifically address human rights or the environment in the supply chain. However, the Dutch Food and Safety Authority is regularly involved in cases where, for example, Dutch companies have violated the EU Timber Regulation (which requires companies to conduct due diligence to ensure that their supply chains are free of illegally sourced timber) by placing illegally sourced timber on the European market. Also, some parties have filed complaints with the OECD Guidelines’ National Contact Point, including for failing to adequately commit to achieving the goals of the Paris Agreement.
See for cases specifically related to host communities our answer to question 11b.
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Responsibility for host communities, environment and indigenous populations – in relation to adverse impact on human rights or the environment in host communities: a. Are there any statutory duties to perform due diligence; b. Have there been any test cases brought against companies?
a. Are there any statutory duties to perform due diligence;
There currently is no legal requirement to conduct due diligence in relation to adverse impacts on host communities or indigenous peoples. This may change in the future. Adverse impacts on host communities and indigenous peoples caused by (actors in) the company’s value chain will need to be considered as part of the due diligence obligations arising from the initiatives mentioned in question 10.a.
b. Have there been any test cases brought against companies?
We highlight two cases in relation to adverse impact on human rights or the environment in host communities. Nigerian farmers and Milieudefensie took Shell to court over oil spills in villages in the Niger Delta in Nigeria between 2004 and 2007. These spills caused rivers and farmland to become severely polluted. In 2021, the Dutch court ruled that Shell needed to pay EUR 15 million in damages to the farmers and their villages, and install a leak detection system. The ruling was the first time that a head office of a multinational company had been held responsible for the damage caused by a subsidiary abroad.
In a matter closer to home, Dutch municipalities filed a lawsuit against Chemours and its legal predecessor DuPont, claiming that they had suffered damages as a result of air emissions of certain PFAS substances from Chemours’ plant in the Netherlands. In 2023, a Dutch court ruled that these emissions were indeed illegal during a certain period of time. For that period, Chemours was found liable for the damages suffered by the communities.
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Have the Advertising authorities required any businesses to remove adverts for unsubstantiated sustainability claims?
The Advertising Code Authority (Stichting Reclame Code – “SRC“) is a self-regulatory body that deals with the self-regulation system of advertising in the Netherlands. It formulates the rules with which advertising must comply, which can be found in the Dutch Advertising Code (Nederlandse Reclame Code – “NRC“). On 1 February 2023, the SRC published the Dutch Sustainability Claims Code (Nederlandse Code voor Duurzaamheidsreclame – “NCDR“, which is part of the overarching NRC), which regulates claims related to environmental and/or ethical aspects of products, services and activities. In short, the NCDR explains that sustainability claims must be concrete and verifiable. Advertisers are subject to a high burden of proof for general or absolute sustainability claims without sufficient context, such as using “green”, “CO2 neutral” or “eco-friendly” in advertisements. The NCDR also includes a new article stating that advertisers should communicate sustainability ambitions in a way that is sufficiently clear that they have set a commitment or target and that such an ambition does not reflect the current situation.
The Advertising Code Committee (Reclame Code Commissie – “RCC“), a body within the SRC, is responsible for reviewing complaints regarding advertising content, and applies the rules formulated by the SRC. In situations where the NRC is found to have been violated, the RCC will recommend the advertiser to discontinue such way of advertising. The RCC’s recommendations are not binding, and it has no power of sanction. Parties can appeal to a recommendation of the RCC at the Board of Appeal (another body within the SRC). If a company does not comply with a recommendation of the RCC or Board of Appeal, the RCC can request the Netherlands Authority for Consumers and Markets (Autoriteit Consument & Markt) to take enforcement actions against such company.
The RCC and Board of Appeal have been very active in the past few years with rulings on sustainability claims. Several companies, for instance Shell, Arla and Eneco faced rulings stating that various advertised sustainability claims were unsubstantiated or misleading. A recent example is a ruling against Primark by the Board of Appeal stating that Primark did not communicate clearly enough to its consumers that various advertisements containing sustainability claims concerned ambitions instead of already achieved results, which made the advertisements misleading.
Such rulings illustrate that consumers in the Netherlands are very active, often also backed by litigation funders, in tackling false sustainability claims. Consumers or NGOs use proceedings at the RCC sometimes as a steppingstone for civil proceedings against advertisers based upon the Unfair Commercial Practices Directive. Therefore, companies making sustainability claims should back their claims with sufficient and solid evidence to be less prone to litigation risks.
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Have the Competition and Markets authorities taken action, fined or prosecuted any businesses for unsubstantiated sustainability claims relating to products or services?
The Netherlands Authority for Consumers and Markets (Autoriteit Consument & Markt – “ACM“) is responsible for consumer protection in the Netherlands, which includes tackling misleading advertising due to false sustainability claims. The ACM has been at the forefront of enforcement against false sustainability claims in Europe. In June 2023, it published the second edition of Guidelines Regarding Sustainability Claims. These guidelines contain five rules of thumb and various practical examples to help companies formulate sustainability claims without them being misleading advertising. The future Green Claims Directive, which is currently being discussed at European Parliament level, contains rules and examples similar to the ACM’s Guidelines Regarding Sustainability Claims.
In recent years, the ACM has investigated several cases of greenwashing that amounted to misleading advertising. In most cases, the ACM did not launch formal investigations, but opted instead for an informal approach where it eventually reached an informal agreement or settlement (for example, a commitment decision) with the company in which the company promised to remove the false sustainability claims. In some settlements, in addition to correcting the claim or ceasing to make the claim, companies make further commitments to the ACM to provide clearer information to consumers, to improve internal governance of sustainability claims, and/or to donate a sum of money to a cause that promotes sustainability. Examples of companies facing such informal ACM action in recent years include Decathlon, H&M, Vattenfall and Ryanair.
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Have there been any test cases brought against businesses for unsubstantiated enterprise wide sustainability commitments?
There is a growing trend in the Netherlands by activist NGOs to prevent targeted companies from making unsubstantiated company-wide sustainability commitments. While NGOs use various methods (such as by filing complaints with the Advertising Code Committee (Reclame Code Commissie) or through public campaigns), there has not been a major increase in the number of civil proceedings brought before the Dutch courts for alleged greenwashing.
Civil court cases often focus on the legal concept of misleading advertising. NGOs usually invoke the general norm of Article 6:193c (misleading acts) or Article 6:193d (misleading omissions) of the Dutch Civil Code (“DCC“), which is based on the Unfair Commercial Practices Directive (“UCPD“), to establish that the advertisement constitutes an unfair commercial trade practice by the trader. Due to the principle of minimum harmonisation (Recital 21 of the UCPD), the Dutch legislature was able to set higher standards. To further protect consumers, Article 193j DCC has reversed the burden of proof; now, the trader must prove that the information is correct and complete.
The most recent and notable example is the case between Fossielvrij (Fossil Free), a climate change NGO, and Royal Dutch Airlines (KLM). Fossielvrij claimed that 19 of KLM’s sustainability claims in advertisements were misleading to consumers and amounted to unfair commercial trade practices. On 20 March 2024, the District Court of Amsterdam found that a total of 15 sustainability claims that KLM had made in advertisements (which KLM removed during the proceedings) amounted to misleading advertising. In short, the District Court ruled that these misleading sustainability claims were characterised by ambiguous and generalised statement about alleged environmental benefits, and that KLM had exaggerated the actual sustainability benefits of the initiatives mentioned in the advertisements. This case may lead to an increase in lawsuits brought by activist environmental NGOs regarding alleged greenwashing.
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Is there a statutory duty on directors to oversee environmental and social impacts?
With regard to the statutory duty of directors to monitor overall environmental and social impact it is relevant to note that the strategy of a company and its affiliates is a matter for the management board. Directors of Dutch companies do not exclusively owe a fiduciary duty to the company’s shareholders as such: they owe it to the company and its business ‒ the latter comprising not only shareholder interests, but also the interests of other stakeholders, too. Moreover, as the Dutch Supreme Court has confirmed, this generally requires boards to take a long-term view.
As mentioned in the answer to question 10.a., the Dutch Corporate Governance Code as updated in December 2022 introduced the concept of “sustainable long-term value creation”. Listed companies are to be guided by the principle that “the management board is responsible for, among other things, sustainable long-term value creation”. The focus here being on the word “sustainable“, which has been added to existing language. It also refers to striking a “balance between the social, environmental and economic aspects of doing business“. While the Code is a soft-law instrument and only applies directly to listed companies, courts have used it as a source of inspiration to establish binding obligations for other companies as well.
In addition, both Dutch (for example, the Child Labour Due Diligence Act (Wet zorgplicht kinderarbeid)) and European regulations (for example, the Deforestation Regulation) have been adopted that specifically target sustainability due diligence. For more information on these regulations, see our answer to question 10.a.
While Dutch company directors are generally granted a wide margin of discretion by the courts, these developments and the broad fiduciary duty of directors mean that board decisions made without giving due consideration to sustainability issues, where relevant, may not be considered good corporate governance by the courts in the future.
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Have there been any test cases brought against directors for presenting misleading information on environmental and social impact?
To the best of our knowledge, no test cases have been brought before Dutch courts against directors for providing misleading information on environmental and social impacts.
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Are financial institutions and large or listed corporates required to report against sustainable investment criteria?
On the basis of the Corporate Sustainability Reporting Directive (“CSRD“), large and listed companies are required to report on their environmental and social impact, and the way in which sustainability matters affect their development, performance and position. This includes how and to what extent their activities are environmentally sustainable within the meaning of the Taxonomy Regulation. This mandatory CSRD reporting is being implemented on a step-by-step basis, with initial companies having to report (on the basis of CSRD) over the financial year starting on or after 1 January 2024. In 2023, the European Commission adopted the European Sustainability Reporting Standards (“ESRS“), which was developed by the European Financial Reporting Advisory Group. The ESRS must be used for sustainability reporting under the CSRD.
Financial institutions are subject to sustainability transparency requirements on the basis of the Sustainable Finance Disclosure Regulation (“SFDR“), the Taxonomy Regulation, and their delegated acts. Under the SFDR specifically, financial market participants (such as insurance companies, asset managers and pension funds) must disclose how they integrate sustainability risks and factors into processes and investment decisions. In addition, financial institutions may be subject to sectoral disclosure rules for environmental, social or governance factors, for example, under the Capital Requirements Regulation.
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Is there a statutory responsibility on businesses to report on managing climate related financial risks?
For the 2023 financial year, companies in scope must comply with the Non-Financial Reporting Directive as implemented by the Dutch Decree on the Disclosure of Non-Financial Information (Besluit bekendmaking niet-financiële informatie). Based on these regulations, in-scope listed companies are required to report on the material risks of the company’s activities in relation to environmental issues, which include topics such as greenhouse gas emissions and renewable energy.
From the financial year 2024 (and beyond), companies in scope will be required to comply with the Corporate Sustainability Reporting Directive CSRD and the accompanying European Sustainability Reporting Standards (“ESRS“), which will have a significant impact on the scope and nature of the sustainability information to be disclosed. Companies must report on their material positive and negative impacts, risks and opportunities related to sustainability issues. This includes information on the company’s business model and strategy, any time-bound targets, the role and expertise of the board of director, the company’s policies, the existence of incentive schemes, due diligence processes and material risks, to the extent related to material sustainability matters.
The ESRS include specific standards related to climate change (ESRS E1). One objective of ESRS E1 is to establish disclosure requirements so that users of sustainability statements can understand the financial effects on the company over the short, medium, and long term in terms of the risks and opportunities arising from the company’s impact and dependencies on climate change. Insofar the topic of climate change is material from either on the basis of impact materiality or on the basis of financial materiality in the sense of the CSRD, companies will report on the management of climate-related financial risks.
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Is there a statutory responsibility on businesses to report on energy consumption?
Reporting on energy consumption falls within the scope of the Energy Efficiency Directive (“EED“), implemented in the Netherlands in various legal frameworks, such as through the Environment and Management Act (Omgevingswet) and the Environmental Activities Decree (Besluit activiteiten leefomgeving). As a consequence of implementation, certain (large) companies are subject to: an energy audit; an obligation to implement energy-saving measures and a duty to report on these measures; and/or a duty to investigate which energy-saving measures the company can take within the next four years. These reports need to be delivered to the competent supervising authority. As such, most large companies provide the relevant information about their energy consumption in their annual report.
The EED was reviewed in 2023, and there were a few changes. The existing audit obligation was rephrased, and the new Article 11 states that companies with an average annual energy consumption higher than 85 TJ of energy over the previous three years, taking all energy carriers together, need to have implemented a certified energy management system by 11 October 2027 and have a first energy audit carried out by 11 October 2026. Companies with an average energy consumption higher than 10 TJ of energy over the previous three years, taking all energy carriers together, and which have not implemented an energy management system, are subject to an energy audit. Based on the recommendations arising from the audit, companies must develop a concrete and feasible Action Plan. The Action Plan needs to identify measures to implement each audit recommendation where technically or economically feasible, and must be submitted to company management. Both the plan and the recommendation implementation rate need to be published in the company’s annual report, and these need to be made publicly available. Article 11 of the revised EED also provides for member states to encourage both groups of companies to provide information in their annual report about: their annual energy consumption in kWh; their annual water consumption volume in cubic metres; and a comparison of their energy and water consumption with previous years. Article 11 needs to be implemented by Member States by 11 October 2025.
In addition to reporting under the EED, reporting obligations may arise from the Energy Performance of Buildings Directive (“EPBD“). The EPBD has been implemented through the Environmental and Management Act (Omgevingswet) in the Environmental Buildings Decree (Besluit bouwwerken leefomgeving) (Article 3.87) and stipulates that office buildings must have a valid label with a maximum value for primary fossil energy consumption of 225 kWh per square metre per year (Label C). If the building does not meet these requirements, it may no longer be used as an office. In December 2023, the European Parliament and the European Council reached a provisional agreement on the Commission’s EPBD proposal, which now awaits formal approval by all parties.
The Corporate Sustainability Reporting Directive and accompanying European Sustainability Reporting standards (ESRS E1) require companies in scope to provide information on energy consumption and mix, if the double materiality test shows that this topic is material to the company. The objective of the disclosure requirement is to provide an understanding of the undertaking’s total energy consumption in absolute value, improvement in energy efficiency, exposure to coal, oil and gas-related activities, and the share of renewable energy in its overall energy mix.
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Is there a statutory responsibility on businesses to report on EDI and / or gender pay gaps?
The European Corporate Sustainability Reporting Directive (“CSRD“) will require certain employers to report on social issues from the 2024 financial year onwards. The CSRD and the accompanying European Sustainability Reporting Standards require employers to report on their workforce, including demographics, working conditions, working hours, fair pay, social dialogue, work-life balance, health and safety, equal opportunities (including gender equality and equal pay), training and development, and diversity. To implement the CSRD, the Dutch legislature has prepared a draft bill (Concepwetsvoorstel implementatie richtlijn duurzaamheidsrapportering) and a draft decree (Concept Besluit implementatie richtlijn duurzaamheidsinformatie). The public consultation process for this draft bill and the draft decree has been completed, which means that they are now subject to parliamentary consultation.
Specifically with regard to equal pay for men and women, several Dutch political parties proposed the Gender Equal Pay Bill (Wetsvoorstel gelijke beloning mannen en vrouwen) in 2019. This proposal would require companies with more than 50 employees to provide information on gender pay differentials for comparable positions, both to their works council, and in their annual report. This proposal has not yet been adopted by the Dutch legislature. On the EU level, the Gender Pay Transparency Directive requires certain EU companies to report on the gender pay gap in their organisation. This directive must be implemented into national legislation by 7 June 2026. A Dutch (draft) implementing bill is not yet available.
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Is there a statutory responsibility to report on modern day slavery in the supply chain?
Currently, the Dutch Disclosure of Non-Financial Information Decree (Besluit bekendmaking niet-financiële informatie), which implements the Non-Financial Reporting Directive (“NFRD“), requires large public interest entities (“PIEs“), including large listed companies, to publish a non-financial statement. This statement must include the main risks related to environmental, social and human resource issues, respect for human rights and the fight against corruption and bribery in the context of the PIE’s activities, including the PIE’s business relationships, products or services that are likely to have a negative impact on these issues. The PIE must also report on how it manages these risks. Reporting on modern day slavery in the supply chain can be subsumed under this heading. However, the NFRD and the implementing decree do not provide detailed reporting requirements to illustrate how the PIE must report on these issues, and the PIE has some discretion to present the information in the way it sees fit. However, it is common practice to use national, international and EU reporting frameworks, including the Global Reporting Initiative standards, which include a standard on forced or compulsory labour, to fulfil this reporting requirement.
The requirements of the NFRD will only be relevant for reports covering the 2023 financial year, as the NFRD will be replaced by the Corporate Sustainability Reporting Directive (“CSRD“) from the 2024 financial year. Unlike the NFRD, the CSRD requires comprehensive and detailed reporting on material sustainability issues related to the company and its value chain. The sustainability reporting standards that a company must follow to meet its obligations under the CSRD include a standard on value-chain workers (ESRS S2), which requires companies to report on actions taken to address material impacts on value-chain workers, as well as approaches to managing material risks and pursuing material opportunities related to value-chain workers, and the effectiveness of these actions. As mentioned in several answers, the Dutch legislature has prepared a draft bill (Concepwetsvoorstel implementatie richtlijn duurzaamheidsrapportering) and a draft decree (Concept Besluit implementatie richtlijn duurzaamheidsinformatie) to implement the CSRD.
The Netherlands: Environmental, Social and Governance
This country-specific Q&A provides an overview of Environmental, Social and Governance laws and regulations applicable in The Netherlands.
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Climate – the law governing operations that emit Greenhouse Gases (e.g. carbon trading) is addressed by Environment and Climate Change international guides, in respect of ESG: a. Is there any statutory duty to implement net zero business strategies; b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated; c. Have there been any test cases brought against companies for undeliverable net zero strategies; d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?
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Biodiversity – are new projects required to demonstrate biodiversity net gain to receive development consent?
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Water – are companies required to report on water usage?
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Forever chemicals – have there been any test cases brought against companies for product liability or pollution of the environment related to forever chemicals such as Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS)?
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Circularity – the law governing the waste hierarchy is addressed by the Environment international guide, in respect of ESG are any duties placed on producers, distributers or retailers of products to ensure levels of recycling and / or incorporate a proportionate amount of recycled materials in product construction?
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Plastics – what laws are in place to deter and punish plastic pollution (e.g. producer responsibility, plastic tax or bans on certain plastic uses)?
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Equality Diversity and Inclusion (EDI) – what legal obligations are placed on an employer to ensure equality, diversity and inclusion in the workplace?
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Workplace welfare – the law governing health and safety at work is addressed in the Health and Safety international guide, in respect of ESG are there any legal duties on employers to treat employees fairly and with respect?
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Living wage – the law governing employment rights is addressed in the Employment and Labour international guide, in respect of ESG is there a legal requirement to pay a wage that is high enough to maintain a normal standard of living?
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Human rights in the supply chain – in relation to adverse impact on human rights or the environment in the supply chain: a. Are there any statutory duties to perform due diligence; b. Have there been any test cases brought against companies?
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Responsibility for host communities, environment and indigenous populations – in relation to adverse impact on human rights or the environment in host communities: a. Are there any statutory duties to perform due diligence; b. Have there been any test cases brought against companies?
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Have the Advertising authorities required any businesses to remove adverts for unsubstantiated sustainability claims?
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Have the Competition and Markets authorities taken action, fined or prosecuted any businesses for unsubstantiated sustainability claims relating to products or services?
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Have there been any test cases brought against businesses for unsubstantiated enterprise wide sustainability commitments?
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Is there a statutory duty on directors to oversee environmental and social impacts?
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Have there been any test cases brought against directors for presenting misleading information on environmental and social impact?
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Are financial institutions and large or listed corporates required to report against sustainable investment criteria?
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Is there a statutory responsibility on businesses to report on managing climate related financial risks?
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Is there a statutory responsibility on businesses to report on energy consumption?
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Is there a statutory responsibility on businesses to report on EDI and / or gender pay gaps?
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Is there a statutory responsibility to report on modern day slavery in the supply chain?