On 5 December 2014, the EU Directive on disclosure of non-financial and diversity information in the directors’ report (2014/95/EU) entered into force. This Directive was implemented in the Netherlands by i) the Implementation Act, which entered into force on 6 December 2016, ii) the Disclosure of Diversity Policy Decree, which entered in force on 31 December 2016, and iii) the Disclosure of Non-Financial Information Decree, which entered into force on 24 March 2017.

This Directive had to be implemented in national legislation by 6 December 2016. The national provisions apply to directors’ reports for financial years starting on or after 1 January 2017.

Non-financial statement

Following the implementation of the Directive, listed companies and other public interest entities ("PIEs"), such as non-listed banks and (certain) insurance companies, if they have more than 500 employees, must set out certain items in a non-financial statement within the directors' report. These items must include (i) a brief description of the undertaking's business model, (ii) a description of the policies of the undertaking in relation to environmental, social and employee matters, respect for human rights, and anti-corruption and bribery matters, including the implemented due diligence processes, (iii) the outcome of those policies, (iv) the principal risks related to the policies and how the risks are managed, and (v) disclosure of non-financial key performance indicators relevant to its particular business. The statement must also contain all the information that is necessary for an understanding of the undertaking's development, performance, position and impact of its activities. If a PIE is head of a group of companies, the statements should also cover the group.

The above implies that a PIE will follow the policies relating to the items described above. If it does not follow the policies, a clear and reasoned explanation must be provided in the directors’ report. PIEs may rely on national, European Union-based or international frameworks for their reports. The European Commission was asked to prepare non-binding guidelines on the methodology for reporting non-financial information before 6 December 2016. These guidelines should facilitate relevant, useful and comparable disclosure of non-financial information by undertakings. The European Commission announced that publication of these guidelines has been postponed until the spring of 2017.

With the implementation of the Directive, article 2:391(5) of the Dutch Civil Code ("DCC"), which provides a legal basis for prescribing further requirements on the content of the directors' report by governmental decree, has been amended. Under the amended rules, the non-financial statement must be included in addition to the corporate governance statement. The details are included in the Disclosure of Non-Financial Information Decree. Under the Decree, an auditor must verify whether the non-financial statement has been prepared in accordance with the Decree and is consistent with the annual report, and whether the non-financial statement contains any material misstatements considering the knowledge and understanding of the undertaking and its environment obtained during the performance of the audit procedures.

In early January 2017, the VEB (Association of Stockholders) sent its annual auditor letter to the big accounting firms. Starting this financial year, the VEB expects the auditors of listed companies to take non-financial information into consideration in the audit of the directors' report. In addition, the auditor must inform the user what its audit approach is. The VEB also stated that if any non-financial information is not audited, the auditor must clearly state which pages of the directors' report have not been assessed for material misstatements. In response, the Netherlands Institute of Chartered Accountants added that for non-financial information being disclosed in respect of the 2017 financial year, the auditor is only required to compare the information in the directors' report with the annual accounts and with its knowledge about the undertaking. The auditor is therefore not required to collect any audit information in addition to the information required for his opinion on the annual accounts.

Diversity policy statement

In the corporate governance statement within the directors’ report, large listed companies must also provide information about their diversity policy for the management board (for one-tier boards) or the management and supervisory boards (for two-tier boards). The undertaking has to set out the objectives of the diversity policy, how it has been implemented and the results in the reporting period. If the undertaking does not follow this policy, the statement must contain an explanation as to why this is the case.

Article 2:391(5) of the DCC already provides a legal basis for the diversity policy statement. Further details of this regulation are included in the Disclosure of Diversity Policy Decree, which amended the Decree adopting further requirements on the contents of the management report. Under the amended decree an auditor must verify whether the statement on the diversity policy in relation to management and supervisory boards' composition are included in the corporate governance statement.