Ambitious CSRD gets green light
The European Union has reached a crucial milestone in sustainability legislation, one that is set to affect a large number of medium-sized and large companies across the Netherlands. On 10 November 2022, the European Parliament formally adopted the Corporate Sustainability Reporting Directive (CSRD). The Council of the European Union subsequently also adopted the CSRD on 28 November 2022, meaning it was officially passed into EU law.
What is the CSRD?
The CSRD is a new directive which requires that companies draft an annual sustainability report in which, among other things, they account for their social and environmental impact. The CSRD expands on existing provisions of the 2014 Non-Financial Reporting Directive (NFRD) by introducing more detailed reporting requirements, as well as widening the scope of companies which must report on sustainability issues such as environmental rights, social rights, human rights, and governance.
When will Dutch companies need to comply?
The implementation timeline for the CSRD has now also been established. Reporting requirements under the CSRD will be phased in between 2024 and 2028.
From 1 January 2024: large public-interest legal entities with more than 500 employees which are already subject to the current Non-Financial Reporting Directive (NFRD). Companies are required to report from 2025 onward on 2024 data.
From 1 January 2025: large legal entities which are not yet subject to the NFRD reporting requirements (i.e. legal entities which, on two successive balance-sheet dates, satisfy at least two of the following criteria: turnover (revenue) in excess of €40 million, more than 250 employees, or €20 million or more in total assets). Companies are required to report from 2026 onward on 2025 data.
From 1 January 2026: listed small and medium-sized enterprises (SMEs). Companies are required to report from 2027 onward on 2026 data.
From 1 January 2028: non-EU companies with operations in the EU and generating net turnover (revenue) within the EU of a minimum of €150 million and operating one or more subsidiaries or branch offices in the EU which exceed certain limits. Companies are required to report from 2029 onward on 2028 data.
The CSRD is expected to take effect either in December 2022 or early 2023. It will subsequently need to be implemented into national law in the various EU Member States within an 18-month period.
Start complying now with the requirements under CSRD legislation
It is recommended that you start making policies, compiling data/using metrics, and integrating ESG performance as soon as possible. You are also advised to start drafting reports by way of practice at this stage, to prevent your organisation from running into problems once the reporting requirements take effect. If you would like assistance in any of these areas, please feel free to contact us for in-depth advice.
The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly consultant.