The past year has been filled with numerous significant developments related to ESG issues, affecting governments, businesses and investors not only in the Netherlands but all around the globe. ESG legislation has multiplied, with several important regulations entering into force during the past months. Most of these laws have their origin in “Brussels” and thus affect stakeholders not only in the Netherlands, but also in other EU member states.

There has furthermore been a new surge in climate litigation, directed at companies as well as governments. While the ongoing climate lawsuits against Shell and ING Bank serve as test cases for collective actions against companies regarding their climate policies, the recent landmark ruling by the ECHR in the case of KlimaSeniorinnen Schweiz v Switzerland provides NGOs with additional arguments to challenge government policies in court.

Finally, directors are increasingly being held accountable for the ESG compliance of their companies, and there is a trend towards soft law becoming hard law – for example, in the field of business and human rights.

There have been several regulatory developments during the past months regarding the environmental aspect of ESG. At the national level, the Dutch Environment and Planning Act (Omgevingswet) entered into force at the beginning of 2024. This new law brings together the majority of existing laws and regulations regarding the built environment, housing, infrastructure and the environment, as well as nature and water. It furthermore implements several EU Directives and international treaties.

The Environment and Planning Act introduces several new instruments for the competent authorities to regulate the physical environment, including the programmatic approach, the project decision and the environmental plan. Under the Environment and Planning Act, natural persons and businesses that want to carry out activities that impact the physical environment can apply for one single permit covering all aspects of the activity at one online service counter. In principle, however, all previous environmental permits remain valid and businesses do not have to take any action if the manner in which they operate does not change. However, there will be more environmental rules in local regulation and more duties of care will apply. Many of them apply in addition to the permit and complying with the permit can still lead to enforcement of an evident violation of the duty of care.

Furthermore, new rules will apply to textile producers in the Netherlands under the EPR for Textiles Decree from 2025 onwards. Under the Extended Producer Responsibility (EPR) scheme, textile producers must organise and pay for the waste management of the products they place on the market. These rules are meant to encourage businesses in the textile industry to adopt more sustainable production methods and increase the amount of recycled content in their products.

From an EU perspective, the beginning of the year was marked by the implementation of the revised Emission Trading System (ETS) Directive. Under the new rules, a new emissions trading system has been developed to address emissions from fuel combustion in buildings, road transport and small industry not covered by the first ETS.

Finally, new rules on industrial emissions (the Industrial and Livestock Rearing Emissions Directive, or “IED 2.0”) entered into force in Brussels – expanding the scope of the existing legislation to include, for example, pig and poultry farms. The revised law also aims to reduce administrative costs and make permitting for the industrial installations and farms concerned more efficient. In addition, industries must submit a transition plan that is in line with the goals of the Paris Agreement and must report on various environmental topics. EU member states have until 1 July 2026 to implement IED 2.0. There is not yet a draft of the implementation regulation in the Netherlands.

Typically, environmental problems in the Netherlands include the fact that many projects cannot proceed and permits are annulled or revoked because of nitrogen emissions. The water quality and water quantity are not good in the Netherlands. Many governmental bodies have furthermore signed an agreement in which they agreed to tighten permit requirements concerning various emissions to the air.

The Dutch State is making agreements with huge industrial companies in the Netherlands concerning the reductions of carbon dioxide emissions.

In relation to the social aspect of ESG, a legislative proposal regarding a licensing system for temporary employment agencies is currently pending in the Dutch Parliament. Under this proposal, temporary employment agencies will only be able to provide workers if they meet certain minimum requirements and obtain a licence. Companies will also be required to hire temporary workers solely through licensed agencies. The aim is to improve the position of workers, particularly migrant workers, and ensure fair competition.

As of 1 January 2025, the Dutch tax authorities will begin enforcing regulations against “false self-employment” (schijnzelfstandigheid) under the Deregulation of Labour Relations Act (Wet Deregulering Beoordeling Arbeidsrelatie (DBA)), with the aim of improving the position of workers who are unjustly denied employee rights and strengthening the social security system.

This year, the implementation process of the EU Directive on equal pay through pay transparency and enforcement mechanisms has started. A legislative proposal for the implementation was expected in the first quarter of 2024. However, to date, no proposal has been published, indicating that the process is behind schedule. The EU Directive must be fully implemented by 7 June 2026.

From an EU perspective, the Corporate Sustainability Due Diligence Directive (CSDDD) furthermore requires large companies to identify and – where necessary – prevent, end or mitigate adverse impacts of their business activities on human rights. These due diligence requirements will be discussed in great detail in 4. ESG Due Diligence.

A legislative proposal on equal opportunities in recruitment was rejected by the Dutch Senate earlier in 2024.

Regarding the governance aspect of ESG, 2024 was the second year during which companies worked with the new Dutch Corporate Governance Code. This document explicitly states that directors are responsible for sustainable long-term value creation and that companies should develop policies addressing diversity and inclusion.

Furthermore, a members’ bill on Responsible and Sustainable International Business Conduct (Initiative Bill) is pending before the Dutch Lower House, with the same objective as the CSDDD. So far, however, the Dutch Parliament has not discussed and voted on the bill in a plenary session. As such, it is uncertain whether the bill will actually enter into force on the proposed date of 1 January 2025. This seems unlikely, as the proposed law not only needs to pass the vote in the Lower House (Tweede Kamer) but also in the Upper House (Eerste Kamer) and it concerns more or less the same goals and obligations as the CSDDD. This process could also lead to new amendments to the bill. For further details of the Initiative Bill, see 2.1 Developments in Corporate Governance.

Finally, the Dutch government is working on several initiatives to establish legal business forms for social enterprises and not-for-profit companies. These include a social private limited liability company (Besloten Vennootschap met een Maatschappelijk doel, or BVm) and a legal form for steward-owned businesses. These developments are part of a larger trend, in which the relationship between a company and its shareholders is evolving. These issues are discussed in greater detail in 2. Corporate Governance.

There has been a recent increase in ESG legislation in the Netherlands. The major share of these regulations come from “Brussels”, as they cover issues that are difficult to address at the national level while maintaining a level playing field for companies. As such, regulators play an important role in the promotion and uptake of ESG initiatives.

Supervision authorities such as the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, or AFM) and the Netherlands Authority for Consumers and Markets (Autoriteit Consument & Markt, or ACM) are often tasked with the enforcement of (new) ESG legislation, such as the CSDDD. In this regard, these authorities are becoming noticeably stricter in recent years, in order to ensure that companies properly adhere to rules concerning ESG issues.

Next to their enforcement tasks, supervision authorities also play an important role by providing guidance on ESG legislation. The ACM, for example, recently decided that banks are allowed to work together when preparing sustainability reports, and provided insight into the assessment of sustainability agreements between companies under EU competition law.

At the individual level, authorities increasingly tend to take a more cautious approach to ESG matters – for example, by imposing very strict obligations when issuing environmental permits. The authorities seem to prefer to be corrected by the judiciary for being too strict rather than for being too lenient. This might be the result of the outcome of certain lawsuits in which governments were held accountable for their actions/inactions – in the Urgenda case, for instance – and the occurrence of various environmental incidents during the past few years. Corporates can and do actively address this imbalance from a business perspective by engaging in constructive discussions with the authorities and, if the government asks too much, by making sure that the option for compensation is utilised. If this does not lead to a positive outcome, one can appeal against the decision of a supervision authority.

Companies, industry, and large agricultural farms that fall within the scope of major ESG legislation such as the CSDDD, the Corporate Sustainability Reporting Directive (CSRD), the IED and the ETS will be most affected by the recent regulatory developments. Moreover, the recently adopted Ecodesign Regulation is expected to have a large impact on manufacturers producing goods for the EU market. This new law enables the EC to set performance and information requirements for almost all categories of physical goods to improve circularity, energy performance and other environmental sustainability aspects of products placed on the internal market.

In the coming years, the EC will set out those ecodesign requirements in so-called delegated acts. Requirements may cover various product aspects, such as durability, repairability, or recycled content. The rules mainly target manufacturers, which are responsible for complying with the ecodesign requirements when designing and producing goods. However, the law also places certain obligations on distributors, importers, and providers of online marketplaces. As such, the regulation is expected to have a big impact on the economy as a whole.

Furthermore, recent developments regarding sustainability claims will put pressure on all types of market participants to think carefully before making green claims about their products or organisational behaviour and to properly substantiate public claims regarding environmental impact or performance. In this regard, the recent judgment in the Fossielvrij/KLM case and the EU legislative proposal for a Green Claims Directive provide an interesting outlook for the future.

Finally, the EC and competition authorities increasingly provide more space for market participants (read: competitors) that wish to collaborate in light of sustainability goals. In 2023, the EC published its updated Horizontal Guidelines, including a new section on competition and sustainability agreements, and the ACM updated its Sustainability Policy Rule not much later. Navigating EU competition rules will become increasingly important as more businesses want to enter into environmental collaboration agreements.

At the EU level, we observe continuous policy efforts aimed at strengthening competitiveness and improving prosperity. The EC’s Strategic Agenda for 2024–29, which sets the EU’s priorities for the next five years, stresses the importance of reinforcing Europe’s sovereignty in strategic sectors – for example, by reducing certain dependencies and diversifying supply chains. The agenda furthermore calls for significant collective investment efforts and the pursuit of a just and fair climate transition.

In her Political Guidelines for 2024–29, President of the EC Von der Leyen reiterated these ambitions and announced the publication of a Clean Industrial Deal, a new Circular Economy Act, a new chemicals industry package, a Quality Jobs Roadmap, a Gender Equality Strategy and a new approach to competition policy, among other things. These initiatives are expected to affect companies and their ESG policies throughout Europe.

In the Netherlands, the new coalition agreement (2024–28) setting out the priorities for the current government  calls for easing the administrative burden imposed on companies, new pension rules, and strategic industrial policy. The agreement furthermore stipulates the need to decrease energy dependence, invest in innovative solutions to reach climate targets (eg, carbon capture and storage and green hydrogen), and conclude tailor-made agreements with large industrial companies in light of sustainability goals.

While the new government seems to be accepting the majority of current climate policies, including the various greenhouse gas reduction targets, it seems unlikely that there will be much additional environmental legislation and initiatives coming from The Hague in the next few years. In that regard, the new coalition is likely to be less ambitious than the previous government. There also seems to be a shift in focus from climate mitigation to climate adaptation in government policies.

Corporate Social Responsibility (CSR) and accountability in this respect are hot topics in the Netherlands. National and international trends have developed whereby CSR-related regulations based on voluntary adoption have been replaced by statutory regulations in the areas of transparency and due diligence.

European Initiatives

In December 2019, the EC introduced the European Green Deal – the purpose of which is to transform the EU into a modern, resource-efficient and competitive economy. Several legislative initiatives have since been taken, including the CSRD and the CSDDD.

CSRD

The CSRD entered into force on 5 January 2023. As from FY 2024, companies falling under the scope of the CSRD will have to draw up an extensive sustainability report on the basis of European Sustainability Reporting Standards (ESRS). Although the CSRD focuses on reporting, the CSRD requirements also affect the governance of companies. The requirements under the CSRD may, for example, lead to changes in the role and composition of the management board and the supervisory board. The CSRD is being implemented in the Netherlands in the form of various laws and decrees and has not yet been finalised. The CSRD will be discussed in greater detail in 5. Transparency and Reporting.

CSDDD

The CSDDD entered into force on 25 July 2024. Under the CSDDD, large companies will need to adopt due diligence policies to identify, prevent or mitigate – and ultimately end – any adverse impact of their operations on human rights, the environment and good corporate governance (including corruption). In-scope companies also need to have a plan in place to ensure that their business strategy is compatible with limiting global warming to 1.5°C in line with the Paris Agreement. The EU member states have two years to implement the CSDDD into national laws and regulations. The CSDDD has not (yet) been implemented in the Dutch regulation.

National Initiatives

The Netherlands already has a specific law on human rights due diligence, but this law has still not entered into force. On 13 November 2019, the Duty to Prevent Child Labour Act (Wet Zorgplicht Kinderarbeid, or WZK) was published in the Dutch Bulletin of Acts and Decrees (Staatsblad). Under the WZK, every company selling goods or rendering services to Dutch end users must take due care to ensure that those goods or services have not been produced using child labour.

In addition, as mentioned in 1.4 Governance Trends, a members’s bill on Responsible and Sustainable International Business Conduct (Initiative Bill) is pending before the Dutch Lower House, with the same objective as the CSDDD. The Initiative Bill provides for a general duty of care (due diligence) that applies to every Dutch company that knows or may reasonably suspect that its operations or that of its business relations may have adverse effects on human rights and the environment in a country outside the Netherlands. Further, the Initiative Bill requires certain large companies to exercise due diligence in their production chains, including the conduct of the company’s business relations, such as suppliers. It is not certain yet whether this bill will enter into force, as it concerns more or less the same goals and obligations as the CSDDD.

The corporate governance requirements for listed and unlisted companies in the Netherlands differ.

For both listed and unlisted companies, Book 2 of the Dutch Civil Code sets out the duties and powers of the various corporate bodies, as well as rules on representation, conflicts of interest, the liability of managing and supervisory directors, financial reporting, and disclosure.

Listed companies must also comply with the Dutch Corporate Governance Code. The Corporate Governance Code contains principles and best practice provisions regulating the relationship between the management board, the supervisory board and the general meeting/shareholders of Dutch listed companies. The Corporate Governance Code was updated on 20 December 2022. The revised code sharpened the focus on sustainability aspects of companies. Sustainable long-term value creation is the key consideration for management boards and supervisory boards when determining strategy and making decisions, and stakeholder interests should be taken into careful consideration. The requirements (the principles and best practice provisions) of the Corporate Governance Code are based on the “comply or explain” principle.

Additional governance requirements apply to listed companies and certain “large” companies – for instance, in the field of diversity.

Under the EU Non-Financial Reporting Directive (NFRD), large public interest entities (listed companies, banks and certain insurers) must have a diversity policy and provide information on it in the corporate governance statement of the management report. Under the NFRD, diversity is used in the broad sense of the word (nationality, age, gender, educational, professional background and so on). The Dutch Diversity Act (Wet Ingroeiquotum en Streefcijfers) introduced a statutory gender diversity quota (one-third men and one-third women) for the supervisory boards of Dutch listed companies on Euronext Amsterdam. This means that, apart from two specified exemptions, any appointment that does not make the composition of the supervisory board of the listed company more balanced is null and void. In addition, large companies (whether listed or not) must set more appropriate and ambitious gender target ratios, draw up an action plan and report on this in the management report and to the Social and Economic Council (SER) within ten months of the end of the financial year.

In 2020, a group of professors of Dutch corporate law called for the introduction of responsible corporate citizenship in the statutory duties of managing and supervisory directors. Managing directors should ensure that the company participates in society as a responsible company. Supervisory directors should supervise this. Thus far, the influence of this proposal has been limited to the Dutch Corporate Governance Code, which includes a principle that the management board of listed companies is responsible for sustainable long-term value creation. The supervisory board oversees this. The proposal in the CSDDD for a duty of care for directors did not make it into the final directive.

The question is whether this proposal represents a broadening of the duties of managing and supervisory directors. Managing and supervisory directors of Dutch companies must be guided in performing their duties by the interests of the company and its affiliated enterprise (the corporate interest). The Dutch Supreme Court has determined that the content of the corporate interest depends on the circumstances of the case and that, as a rule, the interest of companies to which an enterprise is affiliated is determined in particular by promoting the ongoing success of the enterprise. In doing so, managing and supervisory directors must exercise due care in relation to all stakeholders of the company, which may entail that directors must ensure that those interests are not unnecessarily or disproportionately harmed. It could be argued that the corporate interest already implies that companies should behave as responsible companies in society. However, there are different opinions on this among Dutch legal scholars.

The reporting requirements under the CSRD also affect the role and responsibility of the managing and supervisory directors. Companies must provide a description in the sustainability report of the duties and responsibilities of the management and supervisory board with regard to sustainability. Notably, this description covers monitoring the company’s impact on sustainability issues (such as climate change), but also how these sustainability issues affect the company (dual materiality). Among other things, the company must make it clear how these duties are laid down in the division of tasks of the management and supervisory board, and in what manner the boards actually perform these duties. The audit committee will have specific duties in the area of sustainability reporting.

As regards stakeholder engagement, there is an upcoming trend whereby managing and supervisory directors are expected to take into account the interests of an increasing number of stakeholders, and also to actually involve those stakeholders in the decision-making process – for instance, in a stakeholder committee or advisory council.

Social enterprises and not-for profit companies do not yet have a specific legal form in the Netherlands. However, the Dutch government is working on a social private limited liability company, known as the BVm. A BVm draft regulation was submitted for consultation on 21 March 2021. In 2024, the Dutch Lower House also adopted a motion requesting the cabinet to develop a new legal form (rentmeestervennootschap) for steward-owned businesses. Although not yet widespread (the Netherlands currently has about 100 steward-owned companies), steward ownership is gaining increasing attention among entrepreneurs, politicians, lawyers and investors. Steward ownership is an ownership and governance model based on two central principles:

• self-governance by those closely involved in the company and not having a primary financial interest (stewards); and
• profits serve the company’s mission and are invested or donated to fulfil the purpose rather than distributed primarily to shareholders.

It is important to recognise that, in practice, a separate legal form is not necessarily needed to make an impact. Even within existing Dutch legal forms (such as the private limited liability company (Besloten Vennootschap, or BV), the public limited liability company (Naamloze Vennootschap, or NV) and the co-operative), an enterprise can be designed that fulfils that purpose. In addition, companies are also looking for other ways to express their CSR ambitions. By way of example, it is possible to seek alignment with various private codes and quality marks, such as becoming a B Corporation or complying with the Social Enterprises Code.

In the Netherlands, there is a widespread discussion about CSR and the role that (institutional) shareholders play in it. For decades, Dutch case law has been based on the principle that shareholders are allowed to act in their own interests, while behaving towards each other and the company in accordance with what is required by reasonableness and fairness. However, institutional investors are increasingly expected to take account of ESG issues in their voting and investment decisions as well as the traditional factors (financial return, risk and costs), owing to either legislation and regulation, codes of conduct or voluntary agreements; this is known as sustainable shareholdership.

The Dutch Corporate Governance Code provides that shareholders of listed companies are expected to recognise the importance of a strategy aimed at sustainable long-term value creation. In addition, institutional investors are, for instance, legally required to adopt an engagement policy. Such a policy includes conducting dialogues with investee companies.

In practice, institutional investors deal with shareholder engagement in different ways. A case in point is the famous Letter to CEOs by Larry Fink of Blackrock, which has been calling attention to the importance of sustainability, stakeholders and climate change since 2018 (although, as of 2023, his letter became more cautious). Another form of engagement is the so-called Say On Climate, in which shareholders enter into dialogue with boards so that (voluntary) climate action plans are drawn up and submitted to the general meeting for an advisory vote. In the 2024 Dutch AGM season, Unilever Plc and “new” listed company Ferrovial SE – both listed on Euronext Amsterdam – submitted climate action plans for an advisory vote at this year’s AGM. So far there have been no Dutch listed companies that have either voluntarily or obligatorily given the general meeting an advisory or binding voice regarding their climate policy. The growing attention to ESG concerns is further evident in the fact that, like last year, some Dutch AGMs were attended by shareholders affiliated with environmental groups (eg, Milieudefensie and Extinction Rebellion) in an effort to obtain commitments from the managing and supervisory directors in this area.

Sustainable Finance Loans, Bonds and Other Investments

The EC has been actively promoting sustainable finance, encouraging the financing of businesses and their assets with green, sustainable and/or sustainability-linked characteristics through various equity and debt investments, debt finance and other financial products. By way of example, in the EC’s Recommendation (EU) 2023/1425 of 27 June 2023 on facilitating finance for the transition to a sustainable economy, the EC encouraged the use of green and sustainability-linked loans and bonds and equity and debt investment strategies to finance undertakings that want to contribute to the transition to climate neutrality and environmental sustainability.

Green Bonds

Also, the EU Green Bond Regulation 2023/2631 entered into force on 20 December 2023 and will start to apply on 21 December 2024. The EU Green Bonds Regulation sets a gold standard for how companies and public authorities can use green bonds to raise funds on the capital markets on a large scale for green projects. For green bonds to qualify as EU Green Bonds, several requirements need to be met, including the requirement that all funds raised be allocated to projects that are aligned with the EU Taxonomy Regulation – provided that the sectors concerned are already covered by it. A flexibility pocket of 15% will apply to those sectors not yet covered by the EU Taxonomy Regulation and to certain very specific activities. The EU Green Bonds Regulation also includes voluntary disclosure requirements for other environmentally sustainable bonds and sustainability-linked bonds issued in the EU.

Equity and Debt Securities

In relation to debt and equity securities, the European Securities and Markets Authority (ESMA) published a statement on 11 July 2023 that specifically addresses ESG-related disclosures in prospectuses. Issuers and their advisers must consider ESG-related matters when preparing prospectuses, to the extent that the effects of those matters are considered material. This also includes any sustainability information that the issuer is already required to report in accordance with the CSRD.

Funds and Benchmarks

For fund managers and financial advisers, the EU Sustainable Finance Disclosure Regulation (SFDR) sets out requirements for disclosure of information and investment objectives to investors regarding the promotion of financial products with environmental or social characteristics (Article 8 products) or with sustainable investment as their objective (Article 9 products). The SFDR poses several challenges in its interpretation and application, also in relation to other ESG rules and regulations. ESMA and the Dutch supervisory authority AFM have issued several publications in order to clarify and encourage SFDR compliance and sustainable finance investments. By way of example, ESMA published guidelines on key sustainability concepts under the SFDR, the EU Benchmarks Regulation and the EU Taxonomy Regulation and on the use of ESG or sustainability-related terms.

Sustainable Finance Guidelines and Principles

Businesses wishing to raise financing with green and/or sustainability characteristics should consider not only the rules and regulations set out in 3.1 Progress in Green Financing, but also principles and guidelines developed by industry associations – such as the Loan Market Association (LMA) in the EU, its international counterparts the Loan Syndications and Trading Association (LSTA) in the USA and the Asia-Pacific Loan Market Association (APLMA) in Asia-Pacific, and the International Capital Markets Association (ICMA) – on the basis of general market practices. By way of example, the LMA issues principles and guidelines for green, social, sustainability and transition loans and the ICMA issues principle for green, social, sustainability and sustainability-linked bonds, which set expected market standards.

See elsewhere in 3. Sustainable Finance.

The risk that businesses and assets with a less than favourable ESG footprint may become “stranded” and/or “non-bankable” is a reality in EU financial markets.

Various EU regulations include provisions that act as incentives for financial market participants to orient capital towards green and sustainable finance. Examples are disclosure requirements for financial market participants to publish their Green Asset Ratio and Green Investment Ratio, as well as ESG disclosure under capital requirement regulations for banks. These apply in addition to general sustainability requirements under the CSRD and the CSDDD.

Also, the EC recommends that lenders, fund managers and investors engage with borrowers and investees on how sustainability performance and transition targets and plans of undertakings will be taken into account – including in assessing the risk of stranded assets, and transition risks and physical risks more broadly – when seeking financing.

Development of Transition Finance

The EC sees solutions for businesses and assets in transition finance, which can be understood as the financing of climate and environmental performance improvements to transition towards a sustainable economy, at a pace that is compatible with the EU’s climate and environmental objectives and that avoids lock-ins.

Industry associations such as the LMA and the ICMA develop principles and guidance for transition finance. By way of example, the ICMA published a paper on transition finance in debt capital markets following its Climate Transition Handbook in 2024, and the LMA is developing principles for the loans markets in relation to transition finance.

Greenwashing in Financial Markets

The EU supervisory authorities for the financial markets – namely, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and ESMA – are concerned about financial market participants engaging in “greenwashing”. On 4 June 2024, they published their common high-level understanding of “greenwashing” as a practice whereby sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services. The European authorities stress that financial market players have a responsibility to provide sustainability information that is fair, clear, and not misleading.

Greenwashing and Greenhushing

The risk that financial market participants may not meet expected standards that apply to them or their financial products and disclosures, and may qualify as greenwashing under the broad interpretation of that concept by the EU authorities, has led to a retraction of claims and/or promotion of “green” and “sustainability” characteristics by financial market participants. This is a form of “greenhushing” and may also affect the integrity of financial markets and standards of fair disclosure.

Collision of ESG Interests in Financial Markets

EU rules and regulations require the consideration of the interests of multiple and varied stakeholders, and aim to strike a balance between ESG interests. By way of example, the promotion of environmental purposes may “do no significant harm” to other ESG purposes under various regulations addressed in this chapter. Also, in the EU, ESG and climate risks are treated as a form of financial risk, which financial institutions are expected to manage and control under prudential requirements applicable to financial market participants.

Climate and ESG Litigation and Enforcement in Financial Markets

In addition to increased regulation of the financial markets, there is increased monitoring and scrutiny of prospectus and other financial product disclosures by regulators, supervisory authorities and consumer protection authorities. Climate litigation is furthermore a hot topic in the Netherlands and the EU generally, as climate action groups in particular take litigation action against the Dutch government (as in the Urgenda case) and large corporates and banks (eg, Milieudefensie against Shell and ING Bank). Those claims are based mostly on human rights and tort law as they apply in relation to climate and environmental interests. However, these interests may conflict with social interests that are promoted by other litigation parties in such cases, for example.

The nature of the rules is changing. A clear shift from soft law to hard law is taking place. An example of soft law is the OECD Guidelines. Every country has an OECD hotline to which people can report violations. In the Netherlands, for example, there was a case related to the Colombian “blood coal”. In April 2024, victims of paramilitary violence in Colombia filed a complaint against four European energy companies, the ports of Rotterdam and Amsterdam, and the Rotterdam storage company HES in connection with the violent eviction of peasant families around Colombian “colazones”. However, such a procedure can achieve no more than enabling the OECD to hear the parties and to mediate between them.

The Dutch version of the CSDDD, the bill on Responsible and Sustainable International Business Conduct (Initiative Bill), also contains a due diligence reporting obligation that is enforceable under criminal law. Incidentally, this bill, which has been put on hold pending action at EU level, also includes a reversal of the burden of proof. In such cases, the company will have to prove that the law has not been broken. Such a reversal of the burden of proof is also planned for future environmental EU Directives. Interested third parties will no longer have to prove that there were too many emissions, but it will be up to the company to prove that there were none.

It is hard to say at the moment what impact the bill on Responsible and Sustainable International Business Conduct (Initiative Bill) will have on the choices that companies make in working with supply chain partners, given that this regulation is not yet in force. The authors believe it will have an impact in the future, as it is expected that companies will need to have a better understanding of their supply chain first and therefore do the necessary research.

Companies are focusing more on ESG, so it does play a role in M&A. It has an effect on the due diligence investigation and the sale and purchase agreement (SPA) (eg,  covenants between signing and closing, warranties and indemnities). Purchasers will want to know whether the target complies with applicable requirements and whether the target will likely be able to comply with requirements that will become applicable under EU Directives which have already been adopted and will become effective in the short term. Companies should have, for example, a better understanding of their supply chain because of the CSDDD. Industrial companies should have a transformation plan in the short term that explains why their activities are in line with the goals of the Paris Agreement.

In the Netherlands, companies are subject to several disclosure obligations.

• The CSRD – the CSRD replaces the current requirement for large public interest entities to issue a non-financial information statement. In essence, the CSRD requires companies falling within its scope to prepare and publish a sustainability report as part of the management report. One of the key principles of the CSRD is the principle of double materiality; a company is required to report on sustainability matters that are material from an impact or financial perspective. The CSRD does not require all companies to disclose sustainability information. The requirements apply only to companies of a certain size or of a certain type. All “large” undertakings, all “listed undertakings” (excluding micro-undertakings), and certain insurance undertakings that are “large” and/or “listed” are subject to the CSRD.
1. Under Dutch law, an undertaking qualifies as “large” if it meets at least two of the three following criteria on its balance sheet date for two consecutive financial years:
1. balance sheet total >EUR25 million;
2. net turnover >EUR50 million; and/or
3. average number of employees during the financial year ≥250.
2. In addition, the CSRD applies indirectly to non-EU undertakings generating a net turnover of EUR150 million in the EU with at least one subsidiary or branch in the EU. The largest subsidiary or branch of these non-EU undertakings must publish a sustainability report covering the whole group of the non-EU parent undertaking.
• The SFDR – the SFDR applies to regulated financial undertakings offering or advising on investment-related financial products, such as investment firms or asset managers. The SFDR requires these undertakings to enable investors to take into account relevant product- and entity-level sustainability information in their investment decision and monitor the sustainability impact of their investments.
• EU Taxonomy Regulation – the Taxonomy Regulation applies to both CSRD- and SFDR-regulated entities and requires disclosing the extent to which the economic activities performed directly by the undertaking or indirectly through an investment product qualify as environmentally sustainable in accordance with, among other things, a detailed set of criteria.
• Capital Requirements Regulation (CRR) – the CRR requires large listed banks to annually report on ESG risks and report on elements of the remuneration policy.
• Decree on the content of the management report (Besluit inhoud bestuursverslag) – this decree requires large companies to report on diversity and targets for the male-to-female ratio of supervisory board members.

Under the CSRD and the related ESRS, companies must disclose their transition plan for climate change mitigation (ESRS E1-1). If the company does not have a transition plan in place, it must indicate whether and – if so, when it will adopt a transition plan.

The CSRD does not require companies to commit to targets, but merely to disclose the targets related to sustainability matters. If a company is subject to a disclosure requirement that relates to targets, but has not set the particular target, it must disclose this to be the case and it may disclose a timeframe in which it aims to have the targets in place.

Furthermore, under the recently adopted CSDDD, companies falling within its scope will need to publish transition plans for climate change mitigation. These plans should include time-bound emission reduction targets for scope 1, 2 and 3, and an overview of planned actions and investments to reach these targets, among other things. For companies that publish a transition plan in accordance with the CSRD, the obligation to adopt a plan under the CSDDD is considered to be met.

The following restrictions and conditions apply to making sustainability claims and to legally regulated ESG labels.

• Dutch consumer protection law – the ACM is a front-runner in the regulation and supervision of sustainability claims by undertakings providing services to consumers. It has issued guidelines mandating the use of clear and non-misleading sustainability labels. Furthermore, the Advertisement Code Committee (a self regulatory organisation) renders authoritative decisions regarding sustainability advertising upon a complaint by individual consumers or, for instance, NGOs. Such decision could also serve as “stepping stone” to civil proceedings.
• SFDR – the SFDR requires certain regulated financial undertakings to provide investors with sustainability information on financial products if these financial products claim to have sustainability ambitions. Moreover, EU regulators recently adopted guidelines prohibiting the use of sustainability-related terms in the names of financial products without adhering to certain minimum levels of sustainability ambition.
• EU Green Bonds Regulation – bond issuers may adopt the voluntary EU Green Bond label when complying with certain reporting standards, using the funds for projects that are aligned with the EU Taxonomy Regulation, and providing pre- and post-issuance transparency on the use of the funds.
• EU Benchmarks Regulation – providers and users of benchmarks in financial instruments, financial contracts, or on the performance of investment funds are subject to additional requirements if this benchmark is labelled as a Climate Transition Benchmark or as a Paris-Aligned Benchmark.
• ESG Rating Regulation – the recently adopted ESG Rating Regulation is expected to start to apply in 2026. This regulation will require that undertakings providing ESG ratings in a professional capacity obtain a licence from ESMA, are transparent on their ESG rating methodology, and avoid conflicts of interest.

The following regulators monitor compliance with ESG disclosure compliance in the Netherlands:

• the AFM, as a supervisory authority on accounting law and financial markets;
• the Dutch Central Bank (De Nederlandsche Bank, or DNB); and
• the public prosecutor.

The regulator monitoring the use of sustainability marketing claims is the ACM.

Compliance with the CSRD is regulated under the Dutch Economic Offences Act (Wet op de Economische Delicten, or WED) and is overseen by the public prosecution service. Companies that fail to publish their sustainability statements on time may face penalties, which can include:

• up to six months in prison;
• community service; and
• a fine of up to EUR25,750.

The primary authority for enforcing sustainability disclosures for listed companies is the AFM. The AFM is responsible for ensuring that companies publish their annual reports, including the required ESG information, in a timely and complete manner. The AFM has certain enforcement powers under the Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving, or Wtfv). Additionally, the AFM has the discretion to initiate annual account proceedings (jaarrekeningprocedure) with the Enterprise Chamber of the Amsterdam Court of Appeal to evaluate whether a company’s financial and sustainability statements included in the annual reporting comply with legal standards. The AFM also oversees compliance with SFDR requirements.

False or misleading sustainability disclosures can lead to administrative penalties and, in some cases, criminal enforcement if certain conditions are met. Additionally, greenwashing may result in civil claims, intervention by the Dutch Advertising Code Committee (Reclame Code Commissie), or penalties from the ACM.

In the coming years, companies will need to significantly improve their ability to meet their reporting obligations as the volume and complexity of required information increases. While they are likely to become more proficient in handling these disclosures, there is a risk that the process will become a mere “box-ticking” exercise. The new regulations will have a major impact on companies due to the sheer amount of data required, the level of detail involved, and the tight timeframes for compliance.

It is relatively easy to start ESG-related cases in the Netherlands. Dutch civil procedure offers various options to initiate (commercially funded) collective proceedings and claim damages for a “class” of claimants (eg, consumers), which also relate to ESG matters. It is also relatively easy for NGOs advocating for environmental interests or minorities’ rights, for example, to bring a public interest collective action. For such public interest collective actions, a “light” regime in terms of admissibility requirements applies, as long as they do not claim damages. Nevertheless, these are often long-running, complex proceedings. Such public interest collective actions have proven to be a powerful tool for NGOs.

In addition, at least so far, Dutch courts have been willing to take far-reaching decisions regarding jurisdiction but also on substance – for instance, about the role of human rights in climate litigation. Examples are the landmark carbon dioxide reduction orders against the Dutch State and against Royal Dutch Shell as the top holding of an oil and gas company operating worldwide (an appeal against the District Court’s decisions is pending).

Specifically for “greenwashing” claims with regard to advertising by companies, an additional “tool” would be filing a complaint with the Advertisement Code Committee. This is a self-regulatory organisation for the advertising sector in the Netherlands, which renders authoritative decisions about alleged misleading statements of a company (including in terms of sustainability). Such a decision could also serve as a “stepping stone” to a collective action in civil proceedings.

NGOs and activists are definitively an important party in ESG litigation in the Netherlands. The landmark carbon dioxide reduction orders against the Dutch State and against Royal Dutch Shell mentioned in 6.1 Instruments for ESG Litigation were obtained by NGOs (Urgenda and Milieudefensie, respectively). Another example is the civil proceedings against the Dutch airline KLM initiated by FossielVrij, an NGO related to ClientEarth, challenging multiple sustainability-related statements by KLM (represented by Stibbe).

Aside from climate litigation, NGOs have brought proceedings against companies with regard to ESG more broadly. One example is a pending public interest collective action by an NGO named Pharma Accountability Foundation against the pharmaceutical company AbbVie, claiming that AbbVie charges too high a price for its patented rheumatoid arthritis medicine and thereby adversely affects public healthcare. Unions have been targeting the gig economy in the past few years in ESG collective actions as well. Examples of these are the cases against Temper and Uber (both represented by Stibbe).

Dutch public authorities – such as the ACM – are actively enforcing (EU) regulation on the provision of information to consumers, including regarding ESG claims. This is enforcement under public law by means of, so far, informal “warnings” that could be followed by a fine.

Dutch public authorities are also involved in the EU-wide enforcement action by the EC and national consumer authorities (the Consumer Protection Co-operation Network) against 20 airlines in relation to (alleged) greenwashing. As far as the authors are aware, the only civil proceedings so far about ESG-claims in relation to greenwashing are not by investors (or public authorities) but by an NGO against the Dutch airline KLM (see 6.2 Climate Activism).

The number of ESG-related proceedings in the Netherlands is predicted to increase in the coming years. This is partly because of the success of previous collective actions regarding ESG matters and partly because of the increasing body of ESG rules, as in other (EU) countries – in particular, rules on reporting on ESG matters by companies. Following EU Directives such as the CSRD, the IED for industrial companies and the CSDDD, (large) companies will have to perform due diligences and will have to start annual disclosures regarding their performance on various ESG aspects. All this is expected to be closely monitored by NGOs, providing them with information that could be used in possible new ESG cases against those companies.

Other developments suggest that more ESG-related cases against companies can be expected in specific fields. Among these developments are the need to decrease nitrogen emissions in the Netherlands, as well as the increasing scarcity of (clean) water as a consequence of climate change (but also driven by future stricter rules on water quality). Another development may be ESG-related civil proceedings by public authorities against industrial companies. Examples include civil proceedings by several Dutch municipalities claiming damages from Chemours, a chemicals manufacturer, in connection with PFAS emissions. Another possibly emerging subfield of civil proceedings on a collective basis with ESG aspects are proceedings relating to privacy and data protection, backed by commercial funders. Furthermore, and outside the collective action procedural framework, various civil proceedings with ESG aspects relating to events in South America were initiated in the Netherlands. Examples are Hydro, Vale (both represented by Stibbe), Braskem and Repsol.