The Legal Affairs Committee of the European Parliament (JURI) has thrown its weight behind a report on sustainable corporate governance that could pave the way for a new corporate law framework informed by ESG factors in the European bloc.
The report expresses support for an ambitious review of the Non-Financial Reporting Directive (NFRD), which is currently being undertaken by the European Commission and will eventually land in the Parliament to be signed off.
“MEPs reiterate their call to review the NFRD and widen its scope to cover all listed and non-listed large undertakings established in the EU, including non-EU companies operating in the Union,” the Parliament’s press office stated.
Fresh evidence published by the Alliance for Corporate Transparency continues to show that corporate disclosures against the NFRD are “critically poor”. The latest batch of evidence comes from companies in Central, Eastern and Southern Europe.
The report also supports the idea of an overhaul of directors’ duties to consider ESG, grounded in a “corporate sustainability strategy” for which all governing bodies of the company should take responsibility.
“The Commission should therefore put forward a legislative proposal, which clearly defines the directors’ responsibilities when it comes to acting in the long-term interest of the company and society as a whole, among other things,” said the press office.
Closely related to its statements on directors’ duties is a JURI file on corporate due diligence and corporate accountability, which was supposed to be voted on yesterday but has been postponed until early December.
While the latest report has no legal clout, the latter is a legislative report, through which the Parliament can propose EU law.
Both reports give an indication of what Parliament wants to see in future legislative proposals put forward by the Commission – possibly via its upcoming Renewed Strategy on Sustainable Finance, the policy package that will serve as a sequel to the Action Plan on Sustainable Finance.
JURI endorses some of the mandatory approaches envisaged by the Commission as part of that agenda, suggesting mandatory due diligence in supply chains as a new sustainability-related legal standard for company boards (known as ‘vigilance duty’ in jurisdictions including France).
It is the latest sign of mounting political will to start legislation on the topic. Didier Reynders, Commissioner for Justice and Consumers, announced in April this year that the Commission will be promoting due diligence legislation with a 2021 deadline in mind for a proposal.
Members of JURI supported the draft report 13:5, and the final version will be published ahead of a plenary vote next month.
See RI coverage on the European Commission’s sustainable corporate governance consultation here.