Changes from plenary report to adopted text

RemovedEXPLANATORY STATEMENT

RemovedIn the corporate context, a sustainability approach implies that the interest of different stakeholders in the company, including general societal and environmental concerns are duly taken into consideration. Currently, several international initiatives promote sustainable corporate governance, notably the UN Guiding Principles on Business and Human Rights of 2011, the OECD Guidelines for Multinational Enterprises, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy. While these tools are valuable in terms of encouraging responsible business conduct in a globalised environment, they remain soft law only.

RemovedThe European Union undertook multiple steps with the aim of fostering transparency and long-termism in financial and economic activities, such as the revision of the Shareholder’s Rights Directive, the Action Plan for Financing Sustainable Growth, the Disclosure Regulation and the Taxonomy Regulation. The adoption of the Non-Financial Reporting Directive in 2014 was also a major step forward in promoting transparency in order to measure, monitor and manage undertakings’ performance and their long-term impact on society and the environment. However, the shortcomings identified during its implementation show that there is a need to enhance non-financial reporting information in the Union. The rapporteur is convinced that transparency is of key importance to ensure accountability. He welcomes, therefore, the engagement of the Commission to review the current Directive.

RemovedIn addition, a consistent European approach on sustainable corporate governance should be achieved through the establishment of concrete obligations to do and not only to report information. The Rapporteur considers that it is necessary to establish a new framework defining company boards’ duties in terms of sustainability.

RemovedNon-financial reporting obligations

RemovedIn its resolution of 29 May 2018 on Sustainable finance, the European Parliament called for the consideration of an enlargement of the scope of application of the NFRD. The Rapporteur would like to reiterate this call, while specifying which companies need to comply with the obligation of reporting non-financial information. He is of the opinion that the current scope appears to be too narrow and not in line with the definitions laid down in the Accounting Directive.

RemovedThe definition of materiality should be also reviewed and aligned with issues that affect long-term value creation and include matters beyond the purely financial performance of companies.

RemovedThe significant flexibility offered by the NFRD results in companies reporting information is often deemed insufficient, unreliable and not comparable. The non-binding guidelines issued by the European Commission did not remedy this problem. The rapporteur believes that it is, therefore, necessary to put in place a standardised framework, which will allow for clear, balanced, understandable, comparable among companies within a sector, verifiable and objective disclosures.

RemovedAnother recurrent difficulty that the stakeholders are faced with is related to the location of the report, for which the current framework provides also considerable flexibility. Harmonising this aspect seems, therefore, necessary. In any circumstances, the information should be easily accessible, for example on the company’s website or by means of a publicly accessible and free of charge EU-wide digital platform.

RemovedA crucial part of the review should be the content assurance requirement, which is not part of the currently applicable rules on non-financial information. The rapporteur considers that the statements should be subject to a mandatory audit performed by an impartial and independent assurance service provider.

RemovedIt is extremely important to ask the Council to urgently resume negotiations with Parliament on the Commission’s proposal for a directive amending Directive 2013/34/EC as regards disclosure of income tax information by certain undertakings and branches.

RemovedDirectors’ duty of care and additional measures to make corporate governance more sustainability-oriented

RemovedCompanies are not abstract entities disconnected of today’s environment and social challenges. They should more actively contribute to sustainability as their long-term performance, resilience, and even survival may depend on their adequate response to environment and social matters. In this regard, directors’ duty of care towards the company should be defined not only in relation to short-term profit maximisation of shares, but also in relation to sustainability concerns. 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.

RemovedThe rapporteur sees the need for a new framework ensuring that the members of the administrative, management and supervisory bodies of undertakings have the collective responsibility of defining, disclosing and monitoring a corporate sustainability strategy. This duty should require taking into consideration also the interest of stakeholders who may be adversely impacted by the company’s activities. The Rapporteur is of the opinion that the sustainability strategy should include measurable, specific, time-bound and science-based targets aligned with the Union’s commitments at international level. It should also include policies on better integration of employee’s rights in the business activities and a definition of a fair salary policy, as well as sector-specific and/or geographical matters.

RemovedThe process of defining and monitoring the sustainability strategy should include all relevant stakeholders, such as shareholders, employee’s representatives and external stakeholder affected by the company’s activities. Depending on the size of the company, an obligation to establish advisory committees for this purpose should be considered.

Removed25.10.2020