All EU Member States must implement the Corporate Sustainability Reporting Directive (CSRD) by July 6, 2024. With the reporting deadline approaching for entities with securities on EU-regulated markets/public interest entities, swift action by Member States is essential. In the Netherlands, significant progress has been made towards implementing the CSRD. While the drafts are not yet final, they closely adhere to the CSRD framework, making significant changes unlikely. This article explores the specifics of the Dutch implementation of the CSRD, providing a brief overview of the entities within scope, the phased reporting obligations, and opportunities for consolidation at both the parent and subsidiary levels.

THIS ARTICLE IS WRITTEN BY CEM ADIYAMAN ([email protected]) AND SEFA GECIKLI ([email protected]). CEM AND SEFA ARE BOTH PART OF RSM NETHERLANDS BUSINESS CONSULTING SERVICES WITH A FOCUS ON SUSTAINABILITY.

In the Netherlands, the draft law for the implementation of the CSRD was prepared and its consultation has been completed. "Implementation Decree on the Directive for Sustainability Reporting" was put up for consultation. It was presented to the House of Representatives (Tweede Kamer) on June 12, 2024. After the parliamentary debate, the Implementation Decree will be sent to the Council of State and, upon completion, published in the Official Gazette. While the drafts are not yet final, they closely adhere to the CSRD framework, making significant changes unlikely. In this article, we provide an overview of the Dutch implementation of the CSRD.

Entities in-scope  

In line with the CSRD, the Draft Decree outlines a phased implementation of the sustainability reporting requirements. As a side note, the Netherlands has adopted the new size criteria in line with the EU recommendations: 

Briefly mentioning the specifics, the term "Vennootschap" is used broadly in the Draft Decree for in-scope entities, specifically including:

  • Naamloze Vennootschap (N.V.): A Dutch public limited liability company.
  • Besloten Vennootschap met beperkte aansprakelijkheid (B.V.): A Dutch private company with limited liability.
  • Vennootschap onder firma (VoF) or Commanditaire vennootschap (C.V.): General partnerships or limited partnerships, particularly where all partners are fully liable to creditors and are capital companies under foreign law.

This categorization excludes foundations (stichtingen) and associations (verenigingen), focusing the application on specific types of Dutch companies.  

In terms of public-interest entities, banks and insurance companies classified as public interest entities are encompassed by this draft decree, irrespective of their legal structure. Dutch cooperatives are not under the scope unless they are regulated as banks or insurance companies. Pension funds are included only if they qualify as large companies under the specified criteria. Regarding investment funds and UCITS, these financial entities may fall within the scope regarding investments made on their own behalf. Finally, the draft exempts the Dutch Central Bank, public development banks, and credit unions from the CSRD.

Consolidation at parent company level

If a subsidiary's data are included in the consolidated management or sustainability reports of its parent company, then those subsidiaries can be exempt from individual reporting requirements. For this, the parent company must indicate which subsidiaries included in the consolidation are exempt from individual or consolidated sustainability. Also, if the parent company identifies significant differences between the risks or effects on the group and the risks or effects on one or more of its subsidiaries, the parent company shall, as appropriate, provide an adequate insight into the risks and effects on the concerned subsidiary or subsidiaries.  

Exempt subsidiaries must disclose certain information in their management reports:

  • the name and seat of the parent company that reports information at the group level
  • the weblink to the consolidated management report of the parent company, or, in the case of a parent company not governed by the law of a Member State of the European Union or by the law of another state party to the Agreement on the European Economic Area, the weblink to the consolidated sustainability reporting of the parent company
  • the weblink to the assurance opinion
  • a statement that the subsidiary is exempt based on the relevant provisions of the decree  

The sustainability reporting and its corresponding assurance opinion must be published publicly in accordance with the Dutch Civil Code and electronic filing decrees. Additionally, information about sustainability activities, specifically disclosures mandated by the EU Taxonomy, must be included in the management reports of the exempt subsidiaries or in their parent company’s consolidated reports. Moreover, the assurance report on sustainability reporting should be included as a separate part of the auditor's report to ensure it is easily recognizable. Furthermore, the draft requires an exempted subsidiary to publish the consolidated management report or the consolidated sustainability reporting of its parent company in either Dutch, German, English, or French. Finally, it should be noted that there are certain differences in obligations for EU and Non-EU parents.

As a side note, under current law, Dutch Civil Code provides certain exemptions for consolidated financial statements. These provisions for financial statements are not applicable to the consolidated sustainability report. The directive has a different set of conditions for the exemptions/consolidations for sustainability reporting.

Consolidation at subsidiary level

A company or legal entity may prepare consolidated sustainability reporting for other subsidiaries, for example, a CSRD report combining the information of all EU subsidiaries in scope. By such artificial consolidation, all EU or EEA-established subsidiaries included in that consolidation are exempt from their own reporting obligation. The requirements of the consolidated sustainability reporting prepared by a parent company -explained above- is applicable to this report as well.  

For this, following conditions should be met:

  • The consolidated sustainability reporting is prepared by the subsidiary that, on an individual level or, in the case the subsidiary is also a parent company, on a group level, has achieved the largest turnover in the European Economic Area in at least one of the preceding five financial years
  • The consolidated sustainability reporting includes the disclosure of information required by EU Taxonomy, which pertains to the activities of all subsidiaries
  • The sustainability reporting and its corresponding assurance opinion must be published publicly in accordance with the Dutch Civil Code and electronic filing decrees.

Forward Thinking

Understanding the national implementations of the CSRD is as critical as understanding the directive itself. Without a thorough analysis, companies risk jeopardizing their compliance efforts, potentially facing severe consequences. These can range from fines imposed on the company to legal repercussions for individual board members, with the severity and nature of these penalties differing across EU member states. Furthermore, a superficial evaluation of national exemptions can lead to significant inefficiencies, burdening companies with unnecessary administrative tasks. Misinterpreting or overlooking exemptions may result in the duplication of reporting procedures, thereby increasing the workload and diverting resources away from more strategic initiatives.

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