3.3.2 Mandatory sustainability reporting

In 1993 the Environmental Management Act included a section, (chapter 12, title 12.1, and sections 12.1 – 12.10) on environmental reporting for the largest polluters, to facilitate compliance with international environmental standards.3 In the Netherlands, companies follow the principle that they “should assume responsibility for reducing the impact their activities have on the environment”.4

In the Netherlands, the larger polluter companies are required to publish annual environmental reports (Milieujaarverslag-MJV) since 1999.5 The companies are required to disclose information about environmental performances and environmental management systems to the Government (Ministry of Housing, Spatial Planning and the Environment)6 and society in two separate reports.7 The content of the information disclosed in the report for society is up to the companies, as there are no detailed requirements.8 The environmental reports are not required to be externally verified.9

The Dutch Corporate Governance Code lays down the principles and best practice provisions that regulate relations between the management board, the supervisory board and the shareholders.10 It was first published on the 9th of December of 2003 by the Corporate Governance Committee (Tabaksblat Committee). Later in 2008 it was revised by the Frijns Committee, which entered into force on the 1st of January of 2009.11 Since the 30th of December of 2004, Dutch listed companies refer to this code in their annual report, in which, through the “comply or explain principle” (in Dutch, “pas toe of leg uit”), they indicate to what extent they have complied with the principles and best practice provisions.12 From the 11th of February to the 6th of April of 2016, ran a consultation period of 8 weeks, for comments on a new proposal for the revision of the Dutch Corporate Governance Code. The Corporate Governance Code Monitoring Committee explained that the proposal for revision aimed at the long-term corporate value creation, encouraging voluntary integrated reporting in line with the global trend to strengthen corporate governance.13 On the 8th of December of 2016 the code was revised to introduce new corporate governance rules to be applied from the 1st of January of 2017 onwards.14 The structure and content of the code have been totally revised and the new rules favor long-term value creation and more detailed risk management statements in the annual accounts. The companies covered by the code have to access if they are still compliant.

In accordance with the EU Directive 2006/46/EC, listed companies are required to prepare a corporate governance statement containing i) a reference to the corporate governance code that the undertaking has voluntarily applied; ii) reasons for any departure from this code; and iii) a description of the undertaking’s internal control and risk management systems as they pertain to the financial reporting process. The auditor should only attest that the corporate governance report has been prepared.15

European Union

The Netherlands has a mandatory approach to sustainability reporting since the transposition of the EU Modernization Directive (2003/51/EC) in 2005.16 Article 2:391 subsection 1 of the Dutch Civil Code (dated from 1838) directly implements the Modernization Directive into Dutch law.17 As all other Member States, the Netherlands also has to comply with Article 46(1)(b) of the EU 4th Company Law Directive, later becoming the new Accounting Directive (2013/34/EU). This represents a CSR compulsory requirement for all Dutch listed companies, independently of their size, and for all large non-listed companies.18 The policy encourages companies to be transparent about their Corporate Social Responsibility (CSR) activities and promotes transparent non-financial reporting. The existence of non-financial disclosure is subject to audit but the details of the content itself are not.19 The non-financial information disclosure is based on the Global Reporting Initiative G3 guidelines.

On the 23rd of June of 2013, the EU adopted a Directive (2013/36/EU) on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (the Capital Requirements Directive) and the Capital Requirements Regulation (575/2013), on prudential requirements for credit institutions and investment firms, which is directly applicable to companies within the EU.20 It requires banks and other financial institutions to publish certain basic information including, turnover and public subsidies received on a country-by- country basis for each country in which the institution has a subsidiary or branch. This information must be audited and published as an annex to the annual report. This Directive was transposed into Dutch law on the 22nd of January of 2014. On this date, the Dutch Ministry of Finance and Ministry of National Security and Justice published the co-signed proposal for implementation of the Directive 2013/ 36/EU and Regulation (EU) No 575/2013, called the “Dutch CRD IV Implementation Act”).21

From the financial year 2016, under the Accounting Directive (2013/34/EU) adopted in June 2013 in the EU, and under the Transparency Directive (2004/ 109/EC), certain undertakings operating in oil, gas, mineral and mining industries and other active in the logging of primary forest industries must report payments exceeding €100,000 EURO to governmental authorities in a special report adjacent to the annual report.2223The amendments to the Transparency Directive were implemented into Dutch law through the Implementation Act (Implementatiewet wijziging richtlijn transparantie) and through the Implementation Decree (Implementatiebesluit wijziging richtlijn transparantie) and both entered into force on the 29th of January of 2016.24 The new rules relating to certain issuers’ obligation to report on payments to governments (Besluit rapportage van betalignen aan overheden) led to changes in the Dutch Financial Supervision Act (Wet op het financieel toezicht, or Wft) which also applies from the 29th of January of 2016 onwards.25

Global negotiations on climate change have started 24 years ago, in 1992 when Governments met at the United Nations Conference on Environment and Development in Rio de Janeiro. The outcome of this conference was an agreement between Governments to take action to avoid climate change. No specific actions were agreed. Later in 1997 the EU member states became parties to the United Nations Framework Convention on Climate Change and to the Kyoto Protocol. Governments, excluding the US and Russia (signed later in 2004), agreed to cut greenhouse gas (GHG) emissions of 5%, compared to 1990 levels, by 2012.26 The EU emissions reduction target was of 8%, compared to 1990 levels, in the period 2008 to 2012 (the end of the first commitment period). The EU target was redistributed among member states, and the Netherlands agreed to a 6% reduction for the first commitment period. Developing countries, as China, did not commit to any target.27 A second commitment period was agreed until 2020, setting the reduction target on 18% below the 1990 levels by 2020.28

In December 2015, at the Paris climate conference (COP21), 195 countries (including the US, Russia and China) adopted the first legally binding global climate agreement.29 This agreement sets a global action plan to limiting global warming to well below 2°C.30 The EU and its member states committed jointly, to a binding target of at least 40% domestic reduction in GHG emissions, compared to the 1990 levels by 2030.31 In comparison, the US committed on a 26% target, compared to the 2005 levels, by 2025.32

As an EU member state, the Netherlands was required to transpose the 2014 EU Non- Financial Reporting Directive to national law by the 6th of December of 2016.33 This Directive, adopted in November 2014, amends the Accounting Directive (2013/34/ EU) adopted in 2013, and applies for the financial year of 2017. The companies and public interest entities (including insurance companies and credit institutions) operating in the EU have to meet at least two of the Directive’s criteria, which includes i) having more than 500 employees; ii) a net turnover of more than EUR 40 million; and iii) total assets of more than EUR 20 million. The first reports are expected to be published in 2018 referring to the financial year of 2017.