Pending specific proposals from the European Commission (see EUROPE 12552/15), the European Parliament has already advanced a great deal in reflecting on its own sustainable corporate governance. The draft own-initiative report for the European Parliament Committee on Legal Affairs (JURI), dated 3 September and drafted by French MEP Pascal Durand (Renew Europe) has just been made public.
The text first of all sets out a series of recommendations for revising the Non-Financial Reporting Directive (see EUROPE 12430/22), including a broadening of the scope of the Directive to cover all large listed and unlisted companies established in the EU, as defined by the ‘Accounting Directive’ in line with a request already made by the European Parliament in 2018 (see EUROPE 12029/6).
The revision should also, according to the rapporteur, be completely in line with the requirements imposed by the Regulation on sustainability reporting in the financial services sector and the Regulation establishing the EU Taxonomy for Sustainable Finance (see EUROPE 12495/35).
Furthermore, Mr Durand advocates the development of a standardised framework, which will allow for “clear, balanced, understandable, comparable among companies within a sector, verifiable and objective disclosures”. It also calls on the European Commission to set up a free and publicly accessible EU-wide digital platform upon which companies should publish their non-financial information.
Still on the subject of transparency, the draft text stresses the importance of introducing an obligation for companies to produce, on an annual basis, a country-by-country report for each tax jurisdiction in which they operate. It therefore calls on the Council of the EU to urgently resume negotiations with Parliament on the Commission’s 2016 proposal (see EUROPE 12384/3).
A framework for directors’ duties
The Rapporteur is of the opnion that “a coherent European approach” in this area should be achieved by”"establishing concrete obligations to do and not just to provide information”.
In his report, Pascal Durand therefore calls for a new framework defining the duties of company boards of directors in terms of sustainability, asking the Commission to present a legislative proposal to this effect.
“Given the major role of directors in defining companies’ strategy and overseeing its operations, they should have a duty to integrate long-term interests and sustainability risks, impacts, opportunities, and dependencies in the overall strategy of the company”, he wrote.
Such a strategy should include measurable, specific, time-bound and science-based targets aligned with the Union’s international commitments. It should also include policies on better integration of employees’ rights in the business activities and a definition of a fair salary policy.
The definition of the strategy as well as its follow-up should include all relevant stakeholders and, depending on of the size of the company, an obligation to establish advisory committees for this purpose should be considered, according to Mr Durand.
Finally, the rapporteur believes that the variable part of the remuneration of directors should be linked to the achievement of the measurable targets set out in the company’s sustainability strategy.
See the draft report: https://bit.ly/335fppt (Original version in French by Marion Fontana)