The Corporate Sustainability Reporting Directive (CSRD) is causing a lot of uncertainty among Dutch companies. Delayed implementation by the Netherlands and reports from the EU make it seem as if the long-anticipated CSRD may not be coming after all. Should companies continue to prepare for the upcoming reports or should they hold back?
Netherlands too late
The CSRD is a directive, which means that legislation is drafted by the EU and the Netherlands then has to transpose it into national laws and regulations. The EU sets a deadline for transposition, which in this case was July 6, 2024 and thus has been passed. The European Commission launched infringement proceedings against the Netherlands on September 26 for failing to transpose the CSRD. The early transposition is important because the directive requires the first companies to report as early as fiscal year 2024. Even though the directive has been in place in the EU for a long time, as it stands, there is no law at the national level that actually requires companies to do the sustainability reporting.
Although the CSRD is a directive, which must be transposed into national legislation, the elaboration of the requirements of the CSRD can be found in the European Sustainability Reporting Standards (ESRS). The ESRS are a delegated regulation and therefore have direct effect, meaning that they do not have to be transposed into national legislation. The ESRS were published on December 22, 2023, which makes any changes to the CSRD complicated. Any adaptation would have to take into account what is in the reporting standards or would also have to lead to a revision of the ESRS.
Omnibus legislation
There is also a lot of coverage of Ursula von der Leyen's plan to combine the CSRD with other legislation in so-called omnibus legislation. By this, she means the combination of 3 types of ESG legislation: the Corporate Sustainability Due Diligence Directive (CSDDD), the CSRD and the European taxonomy. According to Von der Leyen, the initiative is about reducing the regulatory burden on companies and not about watering down the content.
Possible consequences
Although Von der Leyen argues that nothing substantive about the CSRD needs to change, climate activists in particular fear that simplification through omnibus legislation opens the door to negotiations beyond simplifying reporting requirements.
The mindset within the EU is becoming increasingly conservative. During the last election, the conservative European People's Party ran a successful campaign in which many of the burdens on businesses were attributed to the Green Deal. This package of policy initiatives, with the overarching goal of climate neutrality by 2050, requires a certain amount of effort from businesses. The change in mindset was evident in subsequent votes. In November 2024, there was a vote to delay implementation of the deforestation ordinance, leading to multiple proposals to limit the scope of the law. This example gives the impression that the omnibus simplification package can lead to a debate beyond reporting requirements.
It is possible that there will be plans to defer the rules or limit the scope by increasing the size of businesses bound by them. It is also possible that provisions will be reviewed at the fundamental level to remove provisions that companies feel are not feasible.
To report or not to report?
So, there is a lot of delay in the CSRD's journey. However, there is no indication yet that the delay will lead to a total annulment. Even if implementation is delayed much longer, the first companies will eventually still have to submit reports for fiscal year 2024. In addition, the other (smaller) companies will also have to start collecting the necessary data. For now, however, the ESRS are fixed due to their direct effect, which means that Dutch companies are already bound by them.
The AFM, the intended regulator of CSRD compliance, is also calling on parties to start reporting despite the delay. Should the EU modify the content of the CSRD, an implementation period of two years will apply. This means that, in the meantime, the current CSRD still applies. Other member states have already implemented the CSRD. Should Dutch companies decide not to report in accordance with the rules, this could cause problems throughout the chain they are part of. For multinationals operating in multiple member states, it could also cause problems if they decide not to report because the CSRD has not yet been implemented in the Netherlands.
In short, by getting prepared now, you can ensure that you don't have to play catch-up later to avoid penalties.
Stainable is the first Legal & Automated Compliance platform that focuses entirely on translating European legislation in the field of ESG. We make complex (European) laws and regulations related to sustainability accessible. Using our smart technology, we translate legislation into a fill-in exercise that everyone understands. This is how we help you contribute to a more sustainable world and comply with reporting requirements (SFDR, CSRD, Taxonomy and Dupa 2.0). Simply Comply!
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