It is expected that offshore wind capacity in the North Sea should be between 38 and 72 GW in 2050.

The Regional Energy Strategies (Regionale Energiestratiegiëen) (“RES”) are a key feature of the National Climate Agreement. Currently, local governments, social partners, network operators, the private sector and residents collaborate on energy transition with the aim of becoming regionally supported choices for projects. In the RES, there is a particular focus on processing and creating local support as well as spatial implementation for future projects. On 1 July 2021, RES 1.0 was adopted for each of the 30 regions in the Netherlands. On 1 July the RES regions presented their progress documents, which indicate the status of achieving the relevant region’s goals. In the next decade, the RES will determine the development of renewables in the relevant regions as well as the pace of the implementation of the wider energy transition at a local level. At the end of 2022, the PBL will provide further detail on its appreciation of, and the progress made with respect to RES 1.0. In the past year we have seen that grid capacity issues, scarcity of materials and personnel, the so-called Nevele ruling and Porthos ruling as well as the formation of new coalition parties at the level of the Dutch municipalities following local elections in March 2022, have had an impact on further implementation of RES 1.0. That being said, the 30 RES regions have proposed electricity generation projects to be developed as part of RES 1.0 that amount up to 55 TWh. In this context, the primary goal of RES 1.0, i.e., the generation of 35 TWh of renewable energy onshore (wind/solar), is on track. All stakeholders will strive towards accomplishing as much of the proposed electricity generation of 55 TWh as possible by 2030. In 2023, certain regions will update their RES plans to a version 2.0, which may entail new insights, innovations and relevant updates.

The Dutch government confirmed that it will stimulate the further roll-out of solar and wind energy on land. Incentives could be in the form of the Stimulation of Sustainable Energy Transition (the “SDE++”) subsidy scheme or by any other means (e.g., a two-sided contract for difference).

Since 2015, the Offshore Wind Energy Act (Wet windenergie op zee), as amended, has constituted the legal framework for the construction and operation of offshore wind farms. The most recent amendments of that Act demonstrate that the offshore wind market has matured since 2015. A more robust and future proof tender mechanism and an increase in the permitted operational period of offshore wind farms have been introduced.

On a national level, offshore wind is one of the key drivers to reduce CO2 emissions by 2030. In spring 2022, the Dutch government announced the doubling of its ambition for offshore wind to an installed capacity of approximately 21 gigawatts (GW) by 2030. The total investment costs are estimated at approximately EUR 26 billion. At least half of these costs must be applied on site for the electrification of industrial processes and/or the production of green hydrogen. This ambition dovetails with the ambition of the European Commission laid down in its REPowerEU plan for an accelerated rollout of renewable energy. New offshore wind locations have been designated in connection with the North Sea Programme 2022 – 2027 (Programma Noordzee 2022-2027) as published on 18 March 2022.  

Read more:Offshore wind energy in the Netherlands up to 2030 and beyond, Gijs Smit, Maxim van Vessem (linklaters.com)

Read more:REPowerEU: reinventing Europe's energy architecture, Lothar Van Driessche (linklaters.com)

The Offshore Wind Energy Road Map 2030 (Routekaart windenergie op zee 2030) for the period 2024 up to 2030 lays down the sequence for the development of the wind farms. In light of the developments set forth above, a supplement to the current 2030 Offshore Wind Energy Road Map was adopted at the end of June 2022. TenneT, the national transmission operator for the offshore grid, will install the grid connections for the new offshore wind projects. TenneT’s formal appointment is related to the enclosed development framework for offshore wind. Clustering of offshore wind farms is envisaged. This would leave as much contiguous space as possible for other uses at sea. Consequently, there will be a power density equal to approximately 10 MW of wind capacity per square kilometre. This is about 2.5 times higher than the first large-scale wind farms built and currently operating in the Borssele wind energy area.

In September 2022, the Minister for Climate and Energy announced that guideline targets for offshore wind energy in 2035, 2040 and 2050 will be set in the National Energy System Plan. Effectively, the Netherlands is looking towards realising approximately 50 GW in 2040 and 70 GW in 2050. Following 2030, not only offshore wind will be generated on the North Sea, but substantial volumes of hydrogen are also expected to be produced. The Dutch government prefers a hub-based approach regarding further offshore development. The Energy Infrastructure Plan North Sea 2050 (Energie Infrastructuur Plan Noordzee 2050) will cover the strategic approach on where the Dutch government expects to locate energy hubs and what type of infrastructure would be required in the context thereof. This forms part of an integrated approach of an energy market system which, depending on the characteristics of the site, location, surrounding and (onshore) demand could comprise of bringing electrons and/or molecules to land or to other hubs and/or neighboring countries.

A number of pilots for offshore hydrogen (production) will be brought into function before 2030 in order to be prepared and kickstart a learning cycle. New developments and offshore hydrogen demonstration projects will be part of the North Sea Energy System Development Programme (Ontwikkelprogramma Energiesysteem Noordzee). In connection herewith, the Minister for Climate and Energy is investigating a further coupling of offshore wind energy and renewable hydrogen production, for example in the form of combi-tenders.

It is not only the Netherlands that is committed to ambitious offshore wind targets. The same applies to our neighboring countries. At the North Sea Summit in Esjberg, Denmark, held on 18 May 2022, the heads of government of Denmark, Germany, Belgium and the Netherlands jointly declared their intention to facilitate an exponential growth in offshore wind. The ambition is to quadruple the four countries’ total offshore wind capacity by 2030 and increase the total offshore wind capacity to at least 150 GW by 2050.

The Stimulation of Sustainable Energy Transition (the “SDE++”) subsidy scheme has replaced the SDE+ regime. Under the SDE++ subsidy scheme, in addition to renewable energy, other CO2 reduction technologies have become eligible for incentives as well. Consequently, technologies no longer compete based on the amount of renewable energy produced, but rather on the amounts of CO2 that have been avoided. In fact, the SDE++ subsidy scheme offers an operating premium feed-in tariff subsidy for renewable energy and other CO2 reduction techniques compensating the difference between the cost price of the technology and the market price of avoided CO2. For 2023 the SDE++ budget amounted to EUR 8 billion. As part of the 2023 SDE++ subsidy round so-called fences will be introduced. Effectively, low temperature heat, high temperature heat and molecules qualify as domains for which EUR 750 million will be set aside. This means that subsidy intensity, in this case EUR 400 per tonne CO2, will benefit from preferential treatment within the available budget. Carbon capture and storage (CCS) projects benefited to a great extent from SDE++ subsidies in the past years. Now that the Dutch Council of State (Raad van State).approved the Porthos project, the larges CCS Project of the Netherlands is on the brink of being constructed subject to the final investment decision to be taken later this year.

Netherlands on track for installing electrolysis production capacity in the Netherlands of 500 MW by 2025 and 3-4 GW with a potential increase to 8 GW by 2030.

Hydrogen policy

In its Government strategy on Hydrogen (Kabinetvisie waterstof), published in March 2020, the Dutch government envisages that hydrogen will be an indispensable part of the sustainability strategy for industrial clusters, ports and the transport sector generally. Within all industrial clusters in the Netherlands, market parties are preparing for renewable and low carbon hydrogen to play a growing role, including through feasibility studies, the development of business cases and proposed investments. In November 2022, the Minister of Economic Affairs and Climate confirmed that the Netherlands is on track to meet its ambition of having an installed electrolysis production capacity in the Netherlands of 500 MW by 2025 and 3-4 GW by 2030, and possibly realizing such production capacity sooner than originally planned. Dutch parliament agreed at the end of 2022 to target 8 GW of installed production capacity regarding hydrogen in 2032.

In January 2021 a National Hydrogen Programme (Nationaal Waterstof Programma) was launched. It describes in further detail the activities to be undertaken by the National Hydrogen Programme to facilitate and realise the potential of hydrogen as part of the energy transition in the Netherlands. The National Hydrogen Programme was succeeded by the Hydrogen Road Map (Routekaart Waterstof) which was published in November 2022. The hydrogen road map provides an overview of the current state of affairs on hydrogen and the sectors influenced by it. Additionally, it outlines the planned developments and hydrogen potential for long term (i.e., after 2030) as well as short term goals and actions to be taken for the periods 2022-2025 and 2025-2030.

Highlights during 2022 and 2023

In 2022 a number of milestones were achieved. Inter alia further details on the anticipated market regulation for hydrogen were published, HyNetwork Service (“HNS”) was (provisionally) appointed as hydrogen network operator and specific incentive schemes targeted at the upscaling of hydrogen production were introduced.

On top of this, in early July 2022, Shell Nederland and Shell Overseas Investments took the Final Investment Decision (FID) to build the Holland Hydrogen I renewable hydrogen plant. This electrolyser of 200 MW will be constructed on the Tweede Maasvlakte in the Port of Rotterdam. The renewable hydrogen produced will supply the Shell Energy and Chemicals Park Rotterdam, by way of the HyTransPort pipeline, where it will replace some of the grey hydrogen usage in the Shell refinery.

Furthermore, a series of pilot audits regarding certification of renewable fuels of non-biological origin (RFNBOs) against the draft RED II requirements was concluded in December 2022. The pilot was organized by the Ministry of Economic Affairs and Climate, the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland) and the National Hydrogen Programme. The pilot led to the conclusion that compliance with the RED II RFNBO criteria can be demonstrated by using RFNBO certification schemes.

In addition, as of 1 January 2023, CertiQ and Vertogas (subsidiaries of TenneT and Gasunie, respectively) have merged into one organization, called VertiCer. VertiCer has thereby become the sole agency in the Netherlands and a one-stop shop providing guarantees of origin for all sustainable energy carriers, including green hydrogen.

In its REPowerEU plan, the European Commission has outlined a “hydrogen accelerator” concept to scale up the deployment of renewable hydrogen. This plan demonstrates that the ambition is to produce 10 million tonnes and import 10 million tonnes of renewable hydrogen in the EU by 2030.

Read more: REPowerEU: reinventing Europe's energy architecture, Lothar Van Driessche (linklaters.com)

Market regulation

The market regulation of hydrogen will have various characteristics. First and foremost, the production of hydrogen through electrolysis will be a market activity. That said, large-scale electrolysis production could use steering and guidance (locatiebeslissingen) from the Dutch government. Therefore, the Minister for Climate and Energy intends to influence the location of large-scale onshore electrolysis production sites by means of: (i) spatial regulations; (ii) network planning; and (iii) establishing detailed policy frameworks (i.e. Energy Strategy Plans (Energiestrategieën) and the National Plan Energy System (Nationaal Plan Energiesysteem)).

The latest thoughts on the preferable locations for such large-scale onshore electrolysis production under the National Plan Energy System were published in July 2023 in the draft Programme Main Energy Structure (Ontwerp-Programma Energiehoofdstructuur).

This publication indicated that, for now, the following areas and municipalities are indicated as the preferable locations for these types of projects:

• North Sea Channel area;

• Delfzijl and Eemshaven;

• Rotterdam and Moerdijk; and

• Borssele and Terneuze.

Secondly, private hydrogen networks established to date and new geographically limited private hydrogen networks remain private but newly developed large-scale private hydrogen networks may become part of the national hydrogen transport network (see below).

Finally, in the event of market failures, Dutch network companies (netwerkbedrijven) could play a role in developing underground storage facilities and import terminals for hydrogen. At a later development stage this should be a market activity and the Minister for Climate and Energy foresees a system of negotiated third party access regarding hydrogen import terminals and, subject to other EU Member States’ preference, either negotiated or regulated third party access with respect to hydrogen storage facilities.

Scaling up and incentivising parts of the hydrogen value chain

It is expected that in the next year subsidies to realize up to 1 GW of renewable hydrogen production via electrolysis are made available. The main instruments to incentivize production of renewable hydrogen are subsidies (including budgets for innovative pilots and demonstration projects pursuant to a specific funding programme (Groeifondsprogramma GroenvermogenNL) and DEI (for innovative techniques) and SDE++ subsidy scheme) and stimulating the use of renewable hydrogen as part of refinery processes (the so-called refining route (raffinageroute). Noteworthy is the receipt by VoltH2 of an SDE++ subsidy grant of approximately EUR 85 million for its hydrogen projects in Terneuzen en Vlissingen. These projects relate to two plants for the production of green hydrogen through electrolysis with a capacity of around 25 MW each (and upside potential to scale up to 100 MW in the coming years).

In addition, funds are being made available for selected Important Projects of Common European Interest (IPCEI). Through the European IPCEI state aid framework, projects can be subsidised to boost the development of European hydrogen chains. The Netherlands takes part in all 4 waves within IPCEI Hydrogen announced so far with a total budget of over EUR 1.6 billion. The 4 waves are: (I) technological development (budget EUR 35 million), (II) large scale electrolysis (budget EUR 783.5 million), (III) infrastructure and storage (budget EUR 600 million) and (IV) mobility (budget EUR 199 million).

Over the summer of 2022 the first wave of projects selected by the Netherlands was approved by the European authorities. Under the second wave, concerning large electrolysis projects, seven projects developed by inter alia Ørsted, Shell, ENGIE, Air Liquide and HyCC received subsidies for approximately EUR 800 million. Once realised, such projects will add up to a nominal installed capacity of 1.150 MW of electrolysis projects to produce (renewable) hydrogen.

The Dutch government will release further details of an upscaling instrument for smaller electrolysis projects up to 50MW. A public consultation on the subsidy scheme scaling up renewable hydrogen production via electrolysis (Subsidieregeling opschaling hernieuwbare waterstofproductie via elektrolyse) was held in 2022. It is expected that official announcement of the final scheme will be published at the end of August 2023.

In 2023 the Dutch government will decide upon the budget made available out of the Climate Fund (in which EUR 15 billion is allocated to upscaling of renewable hydrogen (carriers)). In a letter to the Dutch parliament dated 26 June 2023, the Minister for Climate and Energy indicated that the government plans to make EUR 1 billion from the Climate Fund available for the upscaling of hydrogen in 2024 and to reserve EUR 3.9 billion for the years to come, with a view to realising the first 4 GW of electrolysis capacity.

The Dutch government is developing a subsidy scheme to convert large-scale gas power plants to hydrogen, aiming for a climate neutral electricity sector by 2035. The subsidy scheme will initially be available for large-scale gas-fired power plants with a production capacity of more than 100 MW. EUR 1 billion has been set aside in the Climate Fund for this subsidy scheme.

Other specific (indirect) incentivising measures to accelerate the use of hydrogen techniques are a CO2 levy on emissions from industrial installations and custom-made agreements with the 20 largest industrial emitters in the Netherlands. Currently, non-binding agreements in this respect have been entered into with (among others) Shell, OCI N.V., Nobian, Dow, AnQore and Yara. Furthermore, the Dutch government is considering an obligation for industrial parties to use renewable hydrogen (on the basis of binding RFNBO off-take targets set by Europe) as from 1 January 2026 which binding target will gradually increase towards 2030 and demand subsidies (vraagsubsidiëring) by means of either SDE++, contracts for difference or one- or double-sided tenders. The preferred mechanics will be further explored. Obviously, details will depend on the outcome of the discussions taking place in Europe on the amendments to RED II.

The EU Innovation Fund supports projects that contribute to the goals set out in the European Green Deal. Four Dutch hydrogen focused projects will receive grants from the Innovation Fund.

Other noteworthy incentive schemes that are relevant or could be applied to hydrodgen projects in the (near) future are Waterstof in Mobiliteit, a new subsidy scheme focusing on logistics and heavy road transport and Hernieuwbare Energietransitie (HER+), for purposes of certain innovation projects for renewables, including hydrogen.

Hydrogen transport network

The Dutch government envisages re-using the existing gas infrastructure for its hydrogen transport network. The rollout plan for the hydrogen transport network will include details where (and where not) hydrogen transport infrastructure will be developed. In June 2022 the Minister for Climate and Energy informed the public that a flexible, adaptive and phased rollout of the hydrogen transport network is necessary given the current uncertainties on the development of a hydrogen market as well as the interdependency of production, demand and infrastructure of hydrogen.

Gasunie’s subsidiary HNS will in due course become the designated regulated hydrogen network operator for onshore transport. For now, HNS will take the lead in the development and management of the Netherlands’ hydrogen transport network. First, HNS is working on standard hydrogen connection and transportation agreements, and it has received indications from the market on the expected use of the transport network. Secondly, other than the demand and supply side, there are other system elements that will impact the development of a hydrogen transport network. In this context, a hydrogen transport network is a prerequisite for transporting hydrogen (produced at and/or near the sea) to inland customers and (underground) storage locations. Both system elements are subject to ongoing further studies on behalf of the Dutch government. Finally, the Netherlands intends to function as a pivot in the developing hydrogen chain. The latter requires close collaboration and co-ordination with Belgium and Germany.

HNS must develop the hydrogen transport network at the right place and at the right time. Governmental conditions, which will be attached to HNS as a provider of a general service of economic interest (Dienst van Algemeen Economisch Belang), must ensure reasonable tariffs, non-discriminatory access and a reduction in the maturity risk (vollooprisico) for any governmental investments.

The Dutch State co-ordination scheme (Rijkscoördinatieregeling) will apply to the construction of the hydrogen transport network. This will enable a more time efficient and centrally co-ordinated spatial permitting process. Between 2025 and 2030 the Minister for Climate and Energy and the Dutch Authority for Consumers and Market (Autoriteit Consument & Markt) will work towards a system of regulated third party access with regard to the hydrogen transport network.

Dutch parliament has been informed that the hydrogen and gas market decarbonisation package is being discussed in the European fora. Trilogues on this package, which will introduce rules on low-carbon hydrogen are ongoing and EU co-legislators (European Parliament and Council) intend to reach a political agreement on the text likely by end of this year, which will need to be streamlined with the definition of green hydrogen under the Renewable Energy Directive. In this context, a delegated act (DA) with more details on when renewable fuels of non-biological origin (RFNBOs), which include hydrogen and its derivates, can be considered “green” under RED II has been adopted. The Dutch government supports the newly introduced binding national minimum targets for the industry of 42% in 2030 and 60% in 2035 for green hydrogen and RFNBOs proposed in RED III. The Netherlands is closely monitoring these EU developments regarding RED and any hydrogen associated delegated acts.

Click here for more information (EU: Commission publishes delegated act on green hydrogen, Ruth Losch (linklaters.com) EU “Fit for 55”: Decarbonising Gas Markets, Lothar Van Driessche, Ruth Losch (linklaters.com).

The overall investment costs of a hydrogen transport network are currently estimated at EUR 1.5 billion. The Dutch government intends to employ a subsidy of EUR 750 million to deal with low transport volumes and not being able to fully compensate market costs during the rollout phase. The Netherlands foresees a three phase rollout of the hydrogen transport network:

First, large industrial clusters near the Dutch coast (including Belgium and Germany) and connections with storage locations in the northern part of the Netherlands (Groningen and Drenthe) will be established (2025-2026). An alternative route could be necessary whilst an important gas pipe is not expected to be ready for re-use by 2026. Gasunie currently explores alternative routes through Noord-Brabant and the Betuwe.

Secondly, further expansion of the hydrogen network (primarily north-south connections) (2027/2028).

Thirdly, the final rollout of the hydrogen network, in particular connecting the province of Zeeland with the Chemelot chemical cluster in Limburg will be realised (by 2030). Following the summer of 2023, the first construction works for the hydrogen transport network will commence. A 30km pipeline will be built between the Tweede Maasvlakte and Pernis, near Rotterdam.

Specialists have advised the Dutch government to apply a minimum quality of hydrogen equal to 98 mol%. This minimum quality requirement will be evaluated three years following the commercial operations date of the hydrogen network.

With regard to the production of renewable hydrogen by means of offshore electrolysis, which is expected to kick off after 2030, the (regulation of) offshore hydrogen infrastructure must be considered. The Minister of Economic Affairs and Climate prefers that Gasunie will - in due course - be appointed as the offshore hydrogen network operator. Also, Energie Beheer Nederland will be involved in the development of the hydrogen transport infrastructure offshore as it currently participates in all (offshore) gas infrastructure in the Netherlands. Its expertise could play an important role in re-designing and re-using existing gas infrastructure assets for renewable hydrogen transport.

In the context of offshore electrolysis, the Dutch Minister of Climate and Energy indicated to the Dutch government on 28 June 2023 that the wind farm zones Hollandse Kust and Ten Noorden van de Waddeneilanden would be the preferable locations for two demonstrative projects in this respect. EUR 632 million from the Climate Fund will be made available for such projects, in addition to a total reservation of EUR 1.15 billion in future budget.

Hydrogen storage

Next to transport, the storage of hydrogen will become an important part of the Dutch hydrogen infrastructure. In this respect, a hydrogen transport network road map Energy Storage (routekaart Energieopslag) was published in June 2023. This road map will also discuss the role of hydrogen storage. Hydrogen storage can take place by way of (i) short-cyclical storage to deal with temporary surpluses in supply and demand, (ii) seasonal storage to take into account seasonal fluctuations in supply and demand and (iii) long-cyclical storage to guarantee sufficient supply in case of calamities. The general hydrogen road map, published in November 2022, states that three to four salt caverns with a total storage capacity of 750 to 1000 GWh will be required by 2030. According to the current plans, EUR 125 million has already been reserved to cover the financial risks of large-scale hydrogen storage, which amount can be doubled for additional caverns, if needed.

Import

The Dutch government will create viable conditions for the import of hydrogen. On this basis market participants can work on business plans to develop (vertical) hydrogen supply chains. Further research is being undertaken regarding the expected import volumes for hydrogen and LOHC products. The sustainability criteria for renewable hydrogen will take the lead with regard to the importing of hydrogen. The Dutch Minister for Energy and Climate has already indicated mid 2023 that he intends to set out a tender of EUR 300 million for import of hydrogen carriers in the direction of North-West Europe in 2024.

Currently, the Netherlands has (various forms of) co-operation agreements with Portugal, Chile, Uruguay, Namibia, Canada, Spain and the United Arab Emirates on the import and export of (renewable) hydrogen. Noteworthy in this respect is that the Minister for Climate and Energy confirmed to the Dutch parliament that it will perform a corporate social responsibility risk analysis (Maatschappelijk Verantwoord Ondernemen risico-analyse) regarding hydrogen imports.

Current expectations are that ammonia (NH3) will become the dominant carrier for hydrogen, as it is a generally accepted carrier in practice. Ammonia is a globally traded commodity with known properties and a logistics infrastructure that is in place. In light thereof, there are various plans in the Netherlands to expand existing ammonia import facilities and introduce new ammonia import terminals.

Businesses will have a broader scope to enter into agreements, particularly to achieve climate objectives such as a reduction in carbon emissions.

The Netherlands is considering the introduction of a legal framework for social enterprises (besloten vennootschap met maatschappelijk doel (BVm)). Social enterprises will have a specific social purpose as set out in their articles of association (statuten). The managing directors of such enterprises will need to consider and act in accordance with such social purpose. A social purpose is likely to include one or more ESG elements. Social enterprises must report their social purpose in their management reports. Being transparent and disclosing the impact of business activities on people, the environment and society are key to a sustainable future. A legislative proposal for social enterprises is expected to be circulated to Dutch parliament in the second half of 2023. The Dutch Ministry of Economic Affairs and Climate intends to organise a consultation round first regarding the proposed legal framework on social enterprises early 2023.

Currently, no national or international framework on sustainable standards exists but the EU is rolling out its Taxonomy rules. The Dutch government supports a global harmonisation of sustainability standards. In November 2021 the International Financial Reporting Standards (IFRS) Foundation announced the formation of a new International Sustainability Standards Board (“ISSB”), which will develop international sustainability disclosure standards. The ISSB currently reviews and assesses feedback received on a consultation of its two proposed sustainability-related disclosure standards. This comprises IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. The ISSB published the final version of the first two standards on 26 June 2023.

Read more: ISSB sustainability disclosure standards: latest developments, Sara Feijao, Julia Voskoboinikova, Gilly Hutchinson (linklaters.com)

The Netherlands Authority for Consumers and Markets (“ACM”) wants to increase the opportunities for competing businesses to collaborate in the pursuit of sustainability objectives. Businesses will have more scope to enter into agreements, particularly to achieve climate objectives such as a reduction in carbon emissions. The ACM proposes to allow this in cases where the benefits for society as a whole outweigh the disadvantages of any restriction in competition. For this reason, the ACM’s revised “Sustainability Agreements’ Guidelines”, which include examples illustrating the opportunities for business collaboration that contribute to a sustainable society, have been drawn up. In this context, the ACM supports the proposal of the European Commission dated 1 March 2022 on the revision of the so-called “Horizontal Guidelines”. This proposal introduces specific guidelines on the application of competition law to sustainability agreements and recognises that certain sustainability agreements must not be limited by competition law. In practice, the ACM for example has allowed Shell and TotalEnergies, being competitors, to co-operate on CO2 storage given its importance from a sustainability point of view and to serve the energy transition.

It is noteworthy that the ACM takes a firm stance on misleading sustainability claims. Investigations have been conducted into the practices of several companies in the clothing, energy and dairy sectors. The ACM has also published guidelines on making reliable sustainability claims.

Read more: Guidelines sustainability claims | ACM.nl

Listed companies must include in their annual reports information on environment, workforce, social matters, human rights and anti-corruption and bribery policies.

In the Netherlands a debate is ongoing on the introduction in Dutch law of a duty of care on management board members and supervisory board members to participate responsibly in social and economic life. This would involve, among other matters, climate change, tax ethics, pay ratios within the business and diversity. Alternatively, scholars have proposed an explicit elaboration of the corporate purpose in the articles of association of Dutch companies. The Dutch government will further analyse how these proposals could be enshrined in Dutch law.

In addition, certain Dutch members of parliament submitted an updated version of a proposal for the Act for Responsible and Sustainable International Business Conduct (Wet verantwoord en duurzaam internationaal ondernemen) to the House of Representatives in November 2022. The Netherlands have signaled an intention to enact a national law on human rights and environmental due diligence, regardless of the outcome of the proposed Corporate Sustainability Due Diligence Directive (CSDDD or CSD3) in respect of which the European Parliament agreed its negotiating position on the Commission’s proposal for CS3D on 1 June 2023. In September 2023 certain revisions have been proposed regarding the Act for Responsible and Sustainable International Business Conduct.

If the Act for Responsible and Sustainable International Business Conduct is adopted, a general duty of care on all undertakings and due diligence obligations on large undertakings in respect of responsible and sustainable international business conduct becomes effective. Effectively, undertakings in the European Union and foreign undertakings (to the extent they engage in activities in the Netherlands which know or should reasonably suspect that their activities may have a negative impact on human rights, labour rights or the environment in countries outside the Netherlands, must take all reasonable measures to prevent, mitigate or reverse such impacts and, where necessary, enable remediation thereof. Also, such undertakings must exercise due diligence in their value chains.

The ACM is envisaged to be entrusted with enforcing compliance with the proposed regulation. Administrative fines could equal 10% of the net turnover of the undertaking concerned and criminal sanctions may be imposed as well.

The Act for Responsible and Sustainable International Business Conduct has been the subject of much criticism. Members of the House of Representatives feared that this Act would be too strict in comparison with the national laws of surrounding countries. The Council for the Judiciary also indicated that some aspects of the Act, such as its enforcement, are too vague. Therefore, the Act for Responsible and Sustainable International Business Conduct has been revised and will be subject to further discussion.

The European Parliament has agreed on their final position regarding the proposed Corporate Sustainability Due Diligence Directive (“CSDDD”) on 1 June 2023. Under the CSDDD, certain (large) companies are required to identify and address the negative impacts on the environment and human rights in their value chains. These companies must, among other things, formulate a due diligence policy and monitor the effectiveness of such policy. It is estimated that the impact of the CSDDD will be large. However, the CSDDD still has some way to go before it is finalised. Negotiations surrounding the definite text of the CSDDD are currently still ongoing between the European Parliament, European Commission and Council of Europe.

EU Council reaches compromise on CSDDD, James Marlow (linklaters.com)

European Parliament agrees negotiating position on CSDDD - Sara Feijao (linklaters.com)

With regard to board diversity, since 1 January 2022, Dutch-listed companies have been required to meet a quota of at least one-third women and one-third men on their supervisory board or one-tier board. Appointments that are not in accordance with this quota are null and void (nietig), without affecting the validity of passed (supervisory) board resolutions. In addition, all “large” public and limited liability companies must formulate a plan including appropriate and ambitious diversity target figures for their supervisory boards, management boards and their junior management. This plan must be reported to the Social and Economic Council (Sociaal Economische Raad) (“SER”) and the management report (bestuursverslag) shall include a description thereof. The SER will publish reports on the progress of these companies’ achievements of the targets set. These obligations are envisaged to apply for a period of eight years and will be evaluated after a period of five years.

Read more: Legislation on male-female ratio on boards and in management of Dutch companies, Gijs Smit, Jill Reijnen Husagic (linklaters.com)

ESG transparency and disclosure requirements are facing major attention and substantial changes are being faced by corporates in the years to come. The EU Corporate Sustainability Reporting Directive (CSRD) entered into force on 5 January 2023 (i.e., 20 days following its publication in the Official Journal of the European Union (OJEU) on 16 December 2022). EU Member States now have 18 months to implement the new rules into national law.

The CSRD will completely replace and significantly expand the scope of the current EU Non-Financial Reporting Directive. Large companies and all companies listed on EU regulated markets, including certain non-European entities, must include information on environment, workforce, social matters, human rights and governance in their annual reports. A less rigid regime will apply to small- and medium-sized enterprises. Upon its implementation, the CSRD will not only extend the number of companies which will need to report on ESG matters but it will also significantly widen the scope of the reporting obligation itself.

The CSRD will become effective in four stages. Large public interest entities already subject to the EU Non-Financial Reporting Directive shall apply the CSRD with effect from 1 January 2024 (i.e., include in their reporting published in 2025). Finally, on 1 January 2028 certain non-EU companies must report in accordance with the CSRD standards.

The CSRD requires companies within its scope to report in compliance with the European Sustainability Reporting Standards (“ESRS”) which are to be adopted by the European Commission as delegated acts. The first set of draft ESRS developed by the European Financial Reporting Advisory Group (“EFRAG”), the technical advisor to the European Commission, were released to on 23 November 2022. On 31 July 2023, the European Commission published the final versions of the ESRS. Published documents include a Delegated Act (DA), Annex 1 which contains 12 sector-agnostic reporting standards, Annex 2 which contains acronyms and a glossary of terms used in the ESRS, and a Q&A. The ESRS sets out the sustainability transparency rules in-scope companies must adhere to. These rules relate to general requirements for disclosure in sustainability reporting, as well as more specific topics relating to environment (including climate change, pollution and biodiversity), social (including companies’ own workforces) and governance (business conduct). The European Commission adopted f the final standards as delegated acts on 31 July 2023.These reporting requirements will be phased in over time for different companies.

Read more:EU: CSRD published in the Official Journal, Sara Feijao (linklaters.com)

EU: CSRD adopted by Council and Parliament, and EFRAG submits first set of reporting standards to the Commission, Julia Voskoboinikova (linklaters.com)

EU CSRD: Council and European Parliament reach political agreement, Raza Naeem, Vanessa Havard-Williams, David Ballegeer, Claudia Schneider, Tom Cobbaert, Iyes Igiehon, Victoria Hickman, Sara Feijao (linklaters.com)

Accountants recognise the importance of ESG matters for business continuity reasons. . We expect companies to feel obliged to account for their ESG policy.

PwC announced it will be more alert on the impact of climate change on ongoing business operations of its clients. It has stated including explicitly in audit reports of its clients over FY 2022 if a company does not provide sufficient information on the impact of climate change on its business operations in its annual reporting. PwC has found that an increasing number of companies are confirming or promising climate ambitions without explaining the financial implications thereof in their reporting. Also, KPMG publicly expressed to undertake a stricter review of any climate related risks in the next audit cycle.

The Royal Netherlands Institute of Chartered Accountants (Koninklijke Nederlandse Beroepsorganisatie van Accountants (“NBA“)) is further defining the role of accountants regarding analysing, verifying and auditing climate targets and objectives of Dutch listed companies. The NBA has taken the stance that every annual report should contain a report on climate performance and has published a sustainability manual containing guidance for accountants relating to both existing and future standards and regulations, including the CSRD.

The updated Dutch Corporate Governance Code was published on 22 December 2022 (the “Code”). The Code will replace the corporate governance code published in 2016 and relevant companies must adhere to its principles and best practices as from the financial year commencing on or after 1 January 2023 (i.e., compliance with the revised code must be accounted for in 2024 over the financial year 2023). The Code puts a focus on three principal themes: (i) sustainable long-term value creation, (ii) the role of shareholders and (iii) diversity and inclusion. As such, the Code sharpens the focus on sustainability aspects of companies. The Code does not include a specific definition on sustainable long-term value creation, but it does specify that the companies’ management shall take account of the balance between social, environmental and economic aspects of a company’s business. Initial commentary reflects that the updated version could have been more ambitious regarding ESG, especially in light of the increased importance of ESG for various stakeholders in the Netherlands, which stakeholders include groups and/or individuals who are (in)directly influenced by realising the company’s objectives.

A significant shift has also been taking place in the stance of investors, trade unions and other stakeholders in the Netherlands on companies’ responsibilities in relation to ESG. One of those stakeholders, the Dutch Authority for the Financial Markets (“AFM”) recommends listed companies to make more explicit connections in their reporting between sustainable and financial information, as part of its supervision focus areas for 2023. This stance is in line with statements released by the European Securities and Markets Authority in October 2022. In order to assist investors to make better (economic) decisions, the AFM expects listed companies to be more granular on their reporting on sustainability items and the correlation thereof with the financial information included in the financial statements. In a study performed by the AFM in the spring of 2023, it was concluded that important steps are needed to be taken by listed companies ensuring CSRD compliant reporting from 1 January 2024.

In addition, Eumedion, a representative body of institutional investors in Dutch-listed companies, has published its focus points for 2023. Last year, it was focused on plans to accomplish the net zero transition, diversity and inclusion and human rights due diligence. In the coming year attention will be on biodiversity. Eumedion views this focus point as complementary to the climate policy plans that are being adopted by listed companies and their wider net zero plans. Overall, it deems that further work and efforts must be undertaken regarding climate related disclosures and the establishment of net zero plans to meet the targets set by the Paris Agreement.

Furthermore, ABP, the largest pension fund in the Netherlands, and other pension funds have announced that they will stop investing in producers of fossil fuels. Also, certain Dutch pension funds have sold their investments in (Brazilian) meat companies as well. By the end of 2022 ABP publicly announced to overthrow its current investment strategy and, by means of contributing to a more sustainable world, could be existing of sustainable investments for more from than 50% of its current investments. It also expressed to invest over EUR 30 billion in the energy transition by 2030, including significant investments in offshore wind and other renewables. free to reach out to our ESG experts on Corporate / M&A