Supervision under uncertainty: inclusion under and beyond the CSRD (4/6)
This is the fourth article in the series Inclusion as a litmus test for supervisory oversight. Earlier articles considered why inclusion cannot be captured fully in KPIs and reporting, why it requires professional judgement, and how selection and appointment processes reveal which candidates are seen as obvious choices and which implicit norms shape assessments of suitability. Read part 1, part 2 and part 3.
This article takes the next step: what does inclusion mean for the Supervisory Board when formal reporting pressure changes?
Under the CSRD and ESRS, undertakings report on material sustainability matters. Whether inclusion is addressed, for example through own workforce, diversity, governance or culture, depends on the outcome of the double materiality assessment. The revised CSRD scope in Directive (EU) 2026/470 limits mandatory reporting to undertakings that both exceed 1,000 employees and EUR 450 million in net turnover. National transposition remains relevant for application in the Netherlands.
In this article
Three situations for supervision
Three situations are relevant for supervisory board members:
CSRD/ESRS and inclusion is material. The organisation reports on inclusion. The question is how that materiality decision translates into policy, responsibilities, resources, monitoring and decision-making.
CSRD/ESRS, but inclusion is not material. The organisation may not report extensively on inclusion. The question is how that conclusion was reached and whether the topic nevertheless remains relevant to culture, selection processes, governance or societal alignment.
No or fewer CSRD/ESRS obligations. Formal reporting pressure is more limited. The question is what management and supervision choose to continue doing with inclusion.
In all three situations, a supervisory question remains. Only its nature differs.
Reporting provides structure, but not a complete answer
Reporting can show which policies have been adopted, which objectives have been set, which indicators are used and who is formally responsible. That is valuable. It provides structure and forces organisations to make choices explicit.
But reporting does not automatically show how norms are weighed, how selection processes operate in practice or how different perspectives are actually incorporated into decision-making. That is precisely where the role of supervision begins.
If inclusion is material
If inclusion is identified as a material topic, reporting is only the starting point. For the Supervisory Board, the question then becomes how that materiality decision translates into governance practice.
If an organisation states that inclusion is material, this should not only be visible in the annual report. It should also be visible in governance. Where is responsibility located? Which objectives apply? What resources are available? How is progress monitored? And what information does the Supervisory Board receive in addition to formal reporting?
Take a diversity network as an example. Such a network can be valuable, but the supervisory question is not whether it exists. The question is what it does. Does it contribute at strategic level? Are signals from employees, customers or other stakeholders collected and used? Is there a connection with management and the Supervisory Board? Are recurring themes translated into policy, products, services or leadership development?
Or does the network mainly organise activities around awareness days without influencing strategy, governance or decision-making? The number of policy documents, training sessions or networks does not in itself show whether inclusion affects culture, decisions and appointments. The supervisory question is not: do we have a network? It is: does it contribute to the objectives we have set ourselves?
The core point is simple: if inclusion is material, it should also be translated into governance.
If inclusion is not material
An undertaking can fall within the CSRD and still conclude that inclusion is not material. That is possible. But the supervisory question does not end there.
For supervisory board members, the key issue is how that conclusion was reached. Were only formal reporting criteria considered, or also culture, employee signals, selection and appointment processes, talent development and societal alignment?
The double materiality assessment determines what must be included in the sustainability statement. It does not exhaustively determine what is relevant to good supervision. A topic can fall outside reporting and still matter to the quality of governance. Not material for reporting does not automatically mean irrelevant for supervision.
If the CSRD does not or only partly applies
Outside the full CSRD obligations, external standard-setting is more limited. Inclusion then reaches the agenda less automatically through reporting. Customers, financiers, employees and other stakeholders may still ask questions, but the statutory support is weaker.
Under the CSRD, the question is often: are we complying with the requirements? Outside it, the question becomes more strongly: what do we ourselves consider important for good governance? This is precisely where professional judgement becomes visible. Not because every organisation should do the same thing, but because management and supervisory bodies should be able to explain why a topic does or does not receive attention.
If a Supervisory Board only puts inclusion on the agenda because regulation requires it, its anchoring is fragile. The topic may recede as soon as external pressure falls. The revised CSRD also contains review moments, meaning that the scope of the rules may become a legislative issue again in the future.
If inclusion is instead part of the organisation’s own view of good governance, it remains relevant even when reporting is not mandatory.
Language in annual reports is not the same as practice
The language around diversity and inclusion is under pressure at some undertakings. External reporting may change for legal, political or reputational reasons. For supervisory board members, this is a signal to look beyond the wording.
Is there a substantive reassessment? Legal caution? Reputation management? Or are policy, governance arrangements and decision-making also changing? What appears in the annual report is one thing. What happens in selection, culture, decision-making and behaviour is the core issue.
The core point: inclusion remains a governance issue
The CSRD and ESRS can provide structure. A voluntary sustainability standard can help smaller undertakings report proportionately; that standard is now laid down in Delegated Regulation (EU) 2026/1560. But none of these frameworks takes over the responsibility of management and supervision.
Every organisation makes choices about who is heard, who has influence, which signals are taken seriously and which norms guide decision-making. The point is therefore not more reporting for the sake of reporting. The point is better supervision.
For supervisory board members, the central question is: how do we ensure that inclusion does not depend on reporting obligations, but becomes part of professional supervision of culture, decision-making and governance?
Looking ahead
The next article will work through that question in practical terms: how can the Supervisory Board discuss inclusion without turning it into a checklist? Which questions help to assess selection processes more critically? How do you discuss power dynamics and constructive challenge? What information does the Board need? And how do you prevent inclusion from becoming solely an HR topic?
Next month: Supervising inclusion in practice: questions for the Supervisory Board (5/6)
What does this mean for your Supervisory Board?
DUFINCO helps management and supervisory boards translate changing sustainability regulation into workable governance: from scope and materiality to roles, information needs, decision-making and supervision. The focus is not only on the reporting obligation, but above all on what the topic means for the quality of governance and oversight.
Would you like to translate this into your own governance practice? Contact info@dufinco.nl or call +31 (0)6 512 47 217.
