The Corporate Sustainability Reporting Directive (CSRD) will need to be implemented into national law on several salient points by 6 July 2024. These include the applicability of the CSRD to listed companies, the rules on assurance of CSRD reports, and the designation of European Sustainability Reporting Standards (ESRS) as the relevant basis on which to report. The Dutch government published a draft implementing bill addressing the first two points on 17 July 2023. The consultation period ended on 10 September 2023.

Another relevant CSRD-related development is the European Commission's adoption of ESRS in a delegated act on 31 July 2023 – which is subsequently to be endorsed by the European Parliament and Council.

Implementing CSRD in the Netherlands

The Dutch draft bill covers the rules on assurance of CSRD reports and the applicability of the CSRD to listed companies. To this end, the draft bill includes proposed amendments to several Dutch acts, including the Audit Firms Supervision Act, the Financial Markets Supervision Act and the Dutch Civil Code.

Mandatory assurance

The CSRD requires CSRD reports to be subject to an assurance review, and assumes that the external auditor conducting the statutory audit of the financial statements will provide the assurance opinion on the CSRD report. However, the CSRD gives member states the option to allow the assurance review to be conducted by: (i) an Independent Assurance Service Provider (IASP); and/or (ii) an audit firm or external auditor other than the firm or auditor auditing the financial statements.

The draft bill for implementation in the Netherlands follows the CSRD's default premise that the assurance review is performed by the same external auditor that carries out the audit of the financial statements. It also sets out the necessary requirements on quality assurance, training and competence, verification and accreditation.

The draft bill does not provide the option for another party – that is, a different auditor or an IASP – to conduct the assurance review of the CSRD report. It does, however, keep open the possibility of allowing this option at a later stage without having to go through a new legislative process. Both article 5a of the Audit Firms Supervision Act (as proposed in the draft bill) and article 2:391a of the Dutch Civil Code (as proposed in the bill implementing the directive (EU) 2021/2101 on disclosure of income tax information) aim to provide that this can be facilitated later on by an order in council. The explanatory notes to the draft bill mention that the member state options are still being explored and feedback has been requested.

As part of the public consultation procedure for the draft bill, respondents were explicitly invited to present their view on the desirability of allowing parties other than the statutory auditor to provide the assurance opinion on the CSRD report. Most of the respondents, including the AFM, the VEUO, EUMEDION and various audit firms, indicated that they are in favour of having this flexibility. The professional body for accountants, the NBA, presented a different viewpoint and sees too many quality risks in engaging parties other than auditors. De Brauw also participated in the public consultation – our response (in Dutch) can be found here.

CSRD reports of listed companies and other public-interest entities

The draft bill also proposes amendments to article 5:25c of the Financial Markets Supervision Act and certain provisions in Book 2, Title 9 of the Dutch Civil Code. The amendments include listed companies and other public-interest entities being required to make their CSRD report publicly available.

Progress on ESRS and designation as relevant sustainability reporting standards

On 31 July 2023, the European Commission adopted a delegated act containing the first set of ESRS. Changes made to the November 2022 EFRAG draft are more or less the same as those presented in the June 2023 draft delegated act (see on the latter changes, this article). Additional tweaks include a provision that if an undertaking concludes climate change is not material and, therefore, omits all ESRS E1 disclosures requirements, it must give a detailed explanation on its non-materiality decision.

This delegated act is now being scrutinised by the European Parliament and the Council. They have two months from 31 July 2023 (possibly extended by two more months) to respond. They have no power to amend the delegated act, but could reject it, although this seems unlikely given previous steps taken, and approvals obtained on the CSRD itself.

An order in council will implement the Dutch designation of ESRS as the relevant sustainability standards on the basis of which to report. This order in council will be facilitated by the mentioned bill implementing the directive (EU) 2021/2101 on disclosure of income tax information.

Achieving maximum implementation efficiency

The European Financial Reporting Advisory Group (EFRAG) is working on guidance to enhance implementation in areas including interoperability of ESRS with overlapping global sustainability reporting standards of the International Sustainability Standards Board (ISSB), and with other relevant international standards.

EFRAG has confirmed a high level of interoperability of the ESRS with the Global Reporting Initiative (GRI) standards. On 31 July, the Commission, EFRAG and ISSB confirmed a high degree of climate-disclosure alignment.

On 23 August 2023, EFRAG published the first two draft guidance documents as part of internal discussions; one on the materiality assessment, and one on value chain reporting.

Next set of ESRS

The next set of ESRS – the sector-specific ESRS – have yet to be developed, and the timeline for preparing these standards has been postponed. Following a call from EU Commissioner McGuinness, EFRAG decided to temporarily put the development of sector-specific standards on hold to prioritise supporting initial CSRD implementation of the first set of ESRS. To this end, EFRAG will focus on three types of support: (i) providing CSRD guidance (as mentioned in the previous paragraph); (ii) setting up an information platform; and (iii) facilitating educational initiatives.