Debate: Sustainable corporate governance
Date: MONDAY, 14 DECEMBER 2020
Speaker: Nicolas Schmit
Language: EN

To prepare this initiative, the Commission has commissioned studies which show that there is a trend in the last 30 years for listed companies within the EU to focus mainly on short-term benefits of shareholders rather than on the long-term interests of the company. This affects long-term resilience, sustainability and performance. Designing time horizons of corporate decision-making that are more long-term and promoting corporate governance that is more conducive to sustainability would contribute to companies’ resilience and performance. We welcome the fact that the report by Mr Durand targets exactly these matters.  The report calls on the Commission to ensure that directors’ duties should not focus mainly on the short-term maximisation of shareholder value. These duties must pay sufficient attention to the long-term interests of the company and wider society, as well as those of employees and other relevant stakeholders. Companies that integrate stakeholder interests outperform others in the current crisis. As shown by a wide number of studies, such companies have better performance in the long run.  The report by Mr Durand considers that company directors have a duty to address sustainability risks and impacts arising from their operations and supply chains. It also asks that sustainability strategies should include time-bound and science-based targets aligned with the EU’s international commitments. This includes in particular the Paris Agreement and the Convention on Biological Diversity and on deforestation.  The Commission will examine the possible impact of such rules as part of the impact assessment of the forthcoming legislative initiative on sustainable corporate governance. Furthermore, just as the report rightly pays attention to small and medium-sized enterprises, the Commission will also duly consider ways to cater for SMEs. We are looking into possible regulatory requirements which take into account the size of the company, as well as whether it is involved in a sector with a high sustainability risk. SMEs could also be supported with adequate tools and funding.  With regard to Parliament’s suggestions on the Non-Financial Reporting Directive, the Commission included the revision of these rules as part of its work programme for next year. We agree to the aim to be consistent with other relevant EU legislation, including the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation. We also agree that it will be necessary to bring additional categories of companies under the scope of the legislation, and that reported sustainability information should be subject to audits.  We believe it will be necessary to require companies to use mandatory European sustainability-reporting standards. That is why the Commission has given a mandate to the European Financial Reporting Advisory Group to carry out preparatory work for the development of such standards. Next to working on European standards, we will also try to ensure progress towards greater alignment of standards at the global level.  The Commission also looks forward to the European Parliament’s upcoming report by Ms Wolters on corporate due diligence and accountability. Resilient and sustainable supply chains are key for European companies’ long-term competitiveness and viability. Due diligence is also essential to mitigate the adverse impacts of European production in third countries, where the biggest bulk of adverse impacts materialise.  Let me conclude by reiterating that the Commission’s priorities are clear: we need to deliver on the sustainability transition and the recovery, which is a very good opportunity for that. It is therefore key to help businesses in the way they operate, towards a transformation to a more sustainable economy. Allow me just to quote Mark Carney, the former Governor of the Bank of England and now the UN Special Envoy for Climate Action and Finance. He said recently: ‘We have to work for a new basic social contract ensuring fairness across generations.’