SUPERVISORY REPORT

JULY 2025

The Company and Its Place in the World: 3 Focus Points for CSRD

In Short The sustainability report shows the company's place in the world around it: the materiality analysis shows what impact it has on people, the environment, and society, as well as what financial effects sustainability aspects have on the company. This is valuable for investors and society: it helps in making better choices. For the executive board and supervisory board, the analysis provides insights that are strategically relevant, such as where value is at risk of being lost and where new value can be created. The CSRD and ESRS provide structure here. The AFM compliments the steps companies have taken in their sustainability reporting; we see a lot of relevant information. This report contains 3 important focus points for companies to clarify their place in the world even more.

Sustainability Report How do you clarify your company's place in the world even more clearly? The materiality analysis shows how a company relates to the world.

3 Focus Points

1. Materiality Analysis: Explain how impact, risks, and opportunities are determined.
2. Analysis: Make the trade-offs per sustainability theme clear.
3. Consequences: Show the interaction between impact, risks, and opportunities and the strategy and business model.

• Map own activities and value chain well.
• Due diligence: Show to what extent you have grip on impact, risks, and opportunities.
• Show relationship to material themes from own activities and value chain.
• Give a comprehensible explanation in the materiality determination.
• Explain the analysis per environmental theme.
• Make the mutual dependencies visible in a balanced way.
• Make the link visible between material themes and the resilience of the business model and strategy.
• Map the financial effects and be transparent about the use of exemptions.

Sustainability reports (under CSRD and ESRS) offer much relevant information. Reports are more structured, accessible, and visual. Companies have taken good steps.

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SUPERVISORY REPORT

Table of Contents

1. Summary 3 1.1 The materiality analysis shows how the company relates to the world 3 1.2 The materiality analysis provides much relevant information 4 1.3 Three focus points 4
2. Materiality Analysis: Explain how impact, risks, and opportunities are determined 6 2.1 Map own activities and value chain well 6 2.2 Due diligence: Show to what extent you have grip on impact, risks, and opportunities 9 2.3 Show relationship to material themes from own activities and value chain 11 2.4 Give a comprehensible explanation in the materiality determination 12
3. Analysis: Make the trade-offs per sustainability theme clear 14 3.1 Explain the analysis per environmental theme 14 3.2 Make the mutual dependencies visible in a balanced way 15
4. Consequences: Show the interaction between impact, risks, and opportunities and the strategy and business model 19 4.1 Make the link visible between material themes and the resilience of the business model and strategy 19 4.2 Map the financial effects and be transparent about the use of exemptions 21 Appendix: Accountability 23

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1. Summary

1. In this report, we adhere to the term used in the Dutch version of ESRS: materiality analysis.
2. Ten navigation points for good application of CSRD.
3. The thematic research specifically focuses on the disclosure requirements of the materiality analysis ESRS-2 IRO-1, SBM-3 (IRO-management) and the environment-related thematic ESRS standards (E1 to E5) and is not focused on other disclosure requirements such as social (S1 to S4) and business conduct (G-1).

The first sustainability reports according to the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) mark the beginning of a new phase in sustainability reporting. They will ensure more transparency and a level playing field for companies in Europe. They enable users to make informed decisions. Executives and supervisory board members indicate that, among other things, conducting the (double) materiality analysis leads to an improvement in strategic insight.¹ Applying the CSRD and ESRS requirements is a journey surrounded by uncertainties. The AFM adheres to an onboarding path. The sustainability reports for 2024 are part of this.

In the reporting of large listed companies for the financial year 2023, the AFM already saw a good initial start to the (double) materiality analysis—the foundation of the sustainability report—even though the CSRD had not yet been implemented.² Meanwhile, listed companies have further developed their reporting. This research focuses on identifying and assessing impact, risks, and opportunities, on the explanation, and on the consequences thereof for the strategy and business model. In other words: we focus on the company and its materiality analysis.³ Our supervision of sustainability reporting and the mentioned good practices in this report focus on the question of whether the relevant sustainability information is reported transparently. It does not give an opinion on how sustainable a company actually acts.

The AFM compliments the first group of companies: the materiality analysis yields useful and relevant information. This report shows that and gives 3 important focus points for further steps that companies can take.

1.1 The materiality analysis shows how the company relates to the world

The materiality analysis shows how the company relates to the world: it indicates what impact the company has on people and the environment and what financial effects sustainability aspects have on the company. The materiality analysis clarifies which sustainability themes are important for the company. Based on this, the company can set goals and take actions. This is of great value, because the sustainability challenges in the world exist and require effort and attention. It is also helpful for a good understanding by the user to gain insight into to what extent the company is (financially) affected by sustainability risks and challenges, or whether there are opportunities. More than in previous years, we see that the materiality analysis yields relevant information. Reporting has also become more structured, accessible, and visual. We encourage companies to continue reporting reliably and transparently about their sustainability effects.

Relevant for investors and society The analysis gives investors and society insight into the company's impact on its environment and (in the long term) the financial consequences of the sustainability effects and dependencies on the company. This can have positive or negative consequences. This is relevant information for, for example, investors, suppliers, and customers. Because with this, they can make better investment decisions and choices. The risk of greenwashing is also reduced, because investors and society have insight into the main impact, risks, and opportunities, based on a thorough analysis.

Relevant for the executive board and supervisory board (RVC) Conducting the analysis also provides the executive board and the RVC with relevant strategic information. It provides insight into impact, risks, and opportunities, and how these relate to the strategy and business model. The CSRD and ESRS provide structure here. Or as some companies say themselves: 'It helps us to understand ourselves better.' Thus, it supports forward-looking decision-making and strengthens the dialogue with investors and other stakeholders. Transparency also increases the trust of investors and society in the company. It also contributes to a growing level playing field: all European market players within the scope of the CSRD are reporting increasingly according to the same standards. This increases comparability, and sustainability efforts are assessed fairly. For companies that have already taken steps, this means recognition and a fairer competitive position.

1.2 The materiality analysis provides much relevant information

Almost all large listed companies, for whom the obligations would start from 2024, have prepared their sustainability reports in accordance with the CSRD and ESRS.⁴ The materiality analyses in these first sustainability reports yield much relevant information and are more concrete than in previous years. We see clear progress in our research compared to our previous research.⁵ We also see that the information is presented in a more structured, accessible, and clear (visual) manner. Companies have taken good steps in this regard.

⁴ At the time of publication, the Dutch Act on the implementation of the directive on sustainability reporting by companies and the Implementation Decree on sustainability reporting have not yet been implemented. Companies falling within the scope of this research generally state that they already voluntarily comply with the future legal requirements from the CSRD and ESRS. ⁵ Ten navigation points for good application of CSRD. ⁶ The Omnibus Proposal consists of a number of changes in the field of CSRD, ESRS, and Taxonomy. For the CSRD, it consists of proposals for limiting the scope of the CSRD and adjusting the European Sustainability Standards (ESRS). In addition, it includes a 'stop the clock' regulation that postpones obligations for companies that would fall under the obligations from January 1, 2025, as well as an extended relief (ESRS 'quick-fix') for large listed companies that already report under the CSRD and ESRS.

Maintaining double materiality is crucial for reliable sustainability information The European Commission's Omnibus Proposal proposes a change to the scope and phasing of the CSRD reporting obligations. The AFM believes it is crucial that the availability of reliable and transparent sustainability information remains guaranteed. In the proposal, double materiality is retained.⁶

1.3 Three focus points

This research highlights 3 focus points to clarify the company's place in the world even more. We have included examples in our report from some companies that have already taken steps in this regard.

1. Materiality Analysis: Explain how impact, risks, and opportunities are determined. We see that companies provide reasonable starts for this. This matters: because the results of this analysis determine which material sustainability themes (impact, risks, and opportunities) are reported in the sustainability report.

2. Analysis: Make the trade-offs per sustainability theme clear. Some companies already provide a good explanation of the analysis of impact, risks, and opportunities for the environmental themes, which is important for the reader. The materiality analysis for these themes (think of biodiversity and pollution) requires careful consideration and judgment. Therefore, accountability regarding the approach and choices made is important, so that the user understands it well and is included.⁷

3. Consequences: Show the interaction between impact, risks, and opportunities and the strategy and business model. That some companies already show this interaction helps: investors and other stakeholders have better insight into the interaction between impact, risks, and opportunities and the strategy and business model, as well as its resilience. For the (medium) long term, exemptions currently still apply to companies regarding the explanation of the financial effects of identified risks and opportunities.

⁷ These are: ESRS E1 – climate, ESRS E2 – pollution, ESRS E3 – water, ESRS E4 – biodiversity, ESRS E5 – circularity. This is also required for the business conduct theme - ESRS G1, however, this is not part of the scope of our research.

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2. Materiality Analysis: Explain how impact, risks, and opportunities are determined

The materiality analysis is an essential process to map and determine the sustainability effects of products and services from own activities and the entire value chain, and to determine what is reported in the sustainability report.⁸ By explaining important trade-offs, transparency is promoted and sustainable action is stimulated. We already see several good examples of companies that give clear explanations about these trade-offs; we also see that there are still steps to be taken.

2.1 Map own activities and value chain well

For a good understanding of the company and the material sustainability topics, a good understanding of its value chain is also important; this helps the reader of the sustainability report to better understand where a company operates, what it does, and what impact that has. It is therefore also important to clearly define the value chain: what are the relevant relationships of the company, both upstream and downstream. This gives the reader insight into the scope of the company and what the potential impact, risks, and opportunities are.

We see that it is sometimes unclear whether all relevant parts of the value chain have been included. For example, the inflow of raw materials and the associated environmental impact, or the use of hazardous substances. When such elements are left out, an incomplete picture arises of material sustainability effects and their potential consequences.

In most cases, such as with Heineken (good practice 1), we see that a thorough description of the value chain is explained in the sustainability report.

Map the value chain A good insight into the value chain is essential to understand the company and its relationship with sustainability themes well. It helps to see which activities and services take place where and the relevant risks that arise from them.

Therefore, it is important that companies - besides a description of their own products, services, and business processes - also show what happens in the value chain. Think here of raw material consumption, the role of suppliers and transport in the upstream phase, the company's own activities, and then the downstream aspects such as distribution, sales, use of the product or service, and what happens at the end of the product's life, for example in terms of waste processing and recycling.

EFRAG has a guideline for applying the value chain within ESRS The EFRAG IG 2 guideline on the value chain gives explanations and examples to help organizations report on their value chain according to ESRS.⁹ It is a useful guideline for companies on how to deal with the value chain requirements within ESRS; it also contains a summary of frequently asked questions, intended to help organizations apply the value chain within the context of ESRS.

⁹ ESRS 1 paragraph 59 and 60 and chapter 5.3 IG 1 Materiality Assessment_final.pdf

Good practice 1 (Heineken N.V.) Transparency about business model and value chain; Annual Report Heineken N.V. (page 157) Heineken gives in its sustainability report, in the paragraph regarding strategy, business model, and value chain, a concise and understandable overview of what the value chain looks like for Heineken, and how it relates to the business model. Heineken does this by describing the different parts of the value chain and indicating which place in the value chain they occupy: upstream, operations, or downstream. This makes it easier for the reader to understand Heineken's business model and value chain, which subsequently helps to better place the different sustainability themes and the associated impacts, risks, and opportunities.

2.2 Due diligence: Show to what extent you have grip on impact, risks, and opportunities

Due diligence is an important process to identify impact, risks, and opportunities for the company and its value chain and subsequently determine their relative importance.¹⁰ A transparent explanation about this due diligence shows to what extent a company has grip on identifying and assessing impact, risks, and opportunities. In addition, it is important to explain well how the results of the due diligence feed into the materiality analysis.¹¹

We see that the level of depth varies greatly and note that more specific explanations contribute to understanding. Some companies, such as JDE Peet's (good practice 2), go beyond a general description and add an in-depth analysis for specific themes. This increases insight for the reader and makes clear how the company gives substance to the principle of due diligence.

Make the due diligence transparent for the user We have seen various examples where it is insufficiently clear how the company has designed its due diligence process for inventorying its impact, and associated risks and dependencies. We note that making the due diligence process visible and to what extent this process feeds the materiality analysis is important for user insight. With this, the user can form an image of to what extent the company actually has grip on the impact, risks, and opportunities relevant to it.

¹⁰ ESRS 1 paragraph 58 Due Diligence. ¹¹ ESRS 1-60 as well as ESRS 2-53b. ¹² ESRS 1 paragraph 59 – OECD Guidelines and UN Guiding Principles on Business and Human Rights (UNGPs), see also application requirements thematic ESRS standards: ESRS E-4 Application Requirement (AR) 6. This approach is also part of the application requirements of E2 (pollution) AR 1 and 2, E3 (water) AR 1 and 2, and E5 AR 1 and 2 (circularity). ¹³ Guidance_on_the_identification_and_assessment_of_nature-related_Issues_The_TNFD_LEAP_approach_V1.1_October2023.pdf see also chapter 1.1. The Use case of LEAP for the relationship with Due Diligence. ¹⁴ ESRS E-1 Application Requirement (AR) 14 and IFRS - ISSB and TCFD.

ESRS has guidelines for performing due diligence The requirements of ESRS give a good guideline for performing due diligence when identifying and assessing impact, opportunities, and risks.¹² For the design of the diligence process, companies can base themselves on the OECD Guidelines. In addition, there are also handles that can help in mapping impact, risks, and opportunities. One of these handles is the LEAP approach (Locate, Evaluate, Assess, Prepare). This approach is based on the due diligence guidelines of the Taskforce on Nature-related Financial Disclosures (TNFD).¹³ The TNFD primarily focuses on nature, biodiversity, and ecosystem services. In this way, companies can perform a systematic analysis of their nature-related impact and risks. With this, the LEAP approach is a useful method to give substance to nature-related due diligence. In addition to the TNFD, ESRS extends the guidelines from the Taskforce on Climate-related Financial Disclosures (TCFD) for climate-related due diligence, with which companies can perform a systematic analysis of their climate-related impact, risks, and opportunities.¹⁴

Good practice 2 (JDE Peet’s N.V.) Transparent explanation of due diligence; Annual Report JDE Peet’s N.V. (page 127 - 130) JDE Peet’s describes in its sustainability report how it uses the LEAP approach (Locate, Evaluate, Assess, Prepare) in its due diligence for identifying and assessing sustainability effects on 'biodiversity' (ESRS E4). JDE Peet’s describes based on this approach where in its value chain (nature) impact, risks, opportunities, and dependencies are located and how it evaluates them. Furthermore, it reports to what extent the associated risks and opportunities feed its materiality research and what the interaction of the results is on its sustainability strategy. In this example, parts from the first two steps of JDE Peet’s LEAP approach are shown.

2.3 Show relationship to material themes from own activities and value chain

It is important that a clear picture is also sketched of where the impact, risks, and opportunities occur and in which time horizons; this applies both to 'where in the value chain' and 'where in own activities'. These aspects are crucial for a good understanding of impact, risks, and opportunities, how they reflect on the company or vice versa; the way the company impacts the outside world. We see that many companies in our research already establish this relationship between the impact, risks, and opportunities and own activities and value chain. ING Group (good practice 3) shows in its sustainability report as a financial institution how the different impacts, risks, and opportunities relate to its business activities.

Good practice 3 (ING) Transparent explanation of material topics in a time-bound relationship to value chain and activities; ING (page 102) ING has provided an overview of the impact, risks, and opportunities in its sustainability report via the table below, including insight into where they are located in its value chain, the associated time horizons, and the business activities they relate to. This provides users of the annual report with insight into ING's material themes. For each theme, it is indicated which part of the value chain it relates to, what the main (potential) negative and positive impacts are, as well as what the main risks and opportunities are and within which time horizon it is considered relevant. This approach strengthens the understanding of the material themes and makes the coherence between impact and risks visible on both the short and long term.

Climate change (E1) Private Individuals, Private Banking, Wholesale Banking, Business Banking

• Negative impact as a result of lending to clients operating in high-emitting sectors and the financing of non-energy efficient properties (Climate change mitigation).
• Potential (non) financial losses from client defaults and reduced...