Open Letter to EU Commission President: Risking Effective Sustainable Corporate Governance
As the undersigned organisations, who are actively working on the planned Commission proposal on a Sustainable Corporate Governance (SCG) initiative, we would like to express our strong concerns about the delay in the publication of the legislative proposal, as well as the lack of information explaining such new delay.
Moreover, we are concerned that the delay may be symptomatic of a risk that the Commission is parting from its initial ambition to tackle sustainability gaps in corporate governance. Indeed, the Commission had committed to a solid and well balanced proposal that would aim “to ensure that sustainability is further embedded into the corporate governance framework with a view to better align the long-term interests of management, shareholders, stakeholders and society”. The shift towards a more sustainable economy committed through the EU Green Deal and the Sustainable Finance Agenda must be implemented at corporate level. Corporate sustainability reporting, while necessary, is not sufficient to achieve these goals.
The climate, environmental and social crises we are faced with, require immediate action from all actors, and the role of the private sector is pivotal. The SCG initiative facilitates this response, delaying it further hampers the urgent action needed. On that note, we wish to raise two concise points:
- Within the Commission’s initiative it is critical to ensure the involvement of directors, i.e. those who lead and steer companies. Such involvement is paramount to ensure that companies are able to properly evaluate and take the necessary strategic decisions with regard to the management and oversight of due diligence, sustainability risks and impacts...
- [T]he incentives, measurement and accountability mechanisms which frame their governance - and in particular CEO remunerations and dividends’ policies - have traditionally been defined with regards to financial performance only. The Commission’s proposal is key to address these gaps and to ensure coherence and alignment within the corporate and financial market regulatory framework in Europe. In this regard, connecting the dots between companies’ sustainability targets, upcoming due diligence obligations and incentives will support long-term value creation by EU companies.
Furthermore, increasing demand from all kinds of stakeholders demonstrate both the need for, and feasibility of such action...