Corporate Social Responsibility

Corporate Social Responsibility (CSR) is about taking responsibility for the impact of your business activities on society and the environment. It is a strategy under which, as a business owner, you look not only at maximising profit but also at the effects of your business operations on society and the environment. An increasing number of stakeholders, including customers, investors and employees, attach importance to CSR, and it is becoming increasingly significant to the success and reputation of businesses.

ESG stands for Environmental, Social and Governance. These three aspects form an essential part of Corporate Social Responsibility.

Environmental

This concerns how your company deals with environmental issues. From the choices you make about energy consumption to how you manage waste, your environmental impact is a key consideration in CSR. It also means actively seeking to minimise your contribution to climate change and consciously working to conserve natural resources.

This pillar concerns how your company manages the social aspects arising from its business operations. This includes respecting human rights, ensuring good working conditions and promoting the health and safety of your employees. The way in which your company contributes to the community also plays an important role.

Governance

This element concerns the way in which your company is governed. It includes matters such as transparency in your business operations, ethical business practices, effective risk management and respect for shareholders’ rights.

GREENWASHING

In the context of Governance, it is important to take a careful approach to sustainability communications. Greenwashing - wrongly suggesting that your company operates sustainably - can give rise to serious liability risks.

Companies may incur civil liability if their sustainability claims prove misleading, and regulators such as the Netherlands Authority for Consumers and Markets (ACM) are taking an increasingly strict approach. Directors themselves may also be held personally liable if they have knowingly or recklessly made incorrect claims.

Greenwashing legislation

In light of increasing regulation, such as the forthcoming European Green Claims Directive, it is important for directors and companies to ensure that sustainability communications accurately reflect the actual position. Transparency and substantiation are crucial in order to avoid both reputational and liability risks.

EU legislation

ESG criteria and corporate supply-chain liability

The European Union is actively integrating ESG criteria into legislation applicable to businesses. This has resulted in new directives and proposals requiring companies to include ESG developments in their annual reporting. For the time being, this EU legislation applies only to very large companies and financial institutions, but in future SMEs may also be required to report on their efforts in relation to environmental, social and governance matters.

In addition, the EU is developing legislation on supply-chain liability to protect human rights. This means that, for the time being, large companies may be held responsible for human rights violations occurring in their supply chains, even where those violations take place in other countries. The aim is to encourage companies to monitor their entire production chain closely and ensure that their suppliers respect human rights.

Dutch legislation

The BVm

In the Netherlands, work is under way on proposed legislation for the creation of the so-called BVm, a private limited company with a social purpose. A BVm is a company that pursues a social objective alongside profit. To be entitled to use this designation, a company must meet a number of criteria. For example, it must have a social purpose laid down in its articles of association and there must be a balanced consideration of the social objective and the economic interest.

Why instruct our corporate lawyers?

CSR and ESG are complex subjects with many legal aspects. Whether you want to comply with forthcoming EU legislation or structure your company in preparation for the proposed BVm legislation, our corporate lawyers can provide expert advice and support.

We can help you navigate complex legislation and regulations so that your company can operate in a sustainable and socially responsible manner. Contact us to discuss how we can assist you in your specific situation.