Over 60 signatories from the fields of company law, corporate governance and management issued recently a statement “Corporate Governance for Sustainability” that includes specific policy recommendations to clarify the obligations of company boards and directors in order to make corporate governance practice significantly more sustainable and focused on the long term.
The recommendations were published as a response to the EU Commission’s Green Deal, which refers to the need to “embed sustainability in corporate governance”.
With less than a decade left to address the threat of climate change, and with consensus emerging that businesses need to be held accountable for their contribution, the policy recommendations call for a reform of corporate governance in the EU. For this, the signatories recommend that:
- Directors are obliged to develop, disclose and implement a forward-looking corporate sustainability strategy that identifies and addresses material environmental and social issues and significant impacts connected to the company’s business model, operations and supply chain. Such strategy must:
- include verifiable targets and clearly ensure the respect for the planetary boundaries and human rights
- specify a limited set of sector-specific issues and connect public objectives
- link a percentage of the KPIs and remuneration of executive management to the achievement of measurable targets
- Company boards must discuss and sign off on an annual progress report and a non-executive committee should monitor and review the implementation of the strategy
- A national regulatory body should be empowered to bring proceedings against the executive directors where non-implementation has caused serious harm to third parties or unlawful harm to the environment.
Link to the full statement: http://bit.ly/2E4EjJJ, the PDF link is in the text.