Recommendations on Corporate Governance in the Draft EU Corporate Sustainability Due Diligence Directive
As part of its strategy to implement the European Green Deal and the Action Plan on Financing Sustainable Growth, the European Commission presented its proposal for a Corporate Sustainability Due Diligence Directive (CSDDD). This paper specifically addresses the parts of the proposal that relate to corporate governance and directors’ obligations, as well as to the responsibilities of the financial sector. It intends to complement the analyses of nongovernmental and expert organisations on the due diligence aspects.
- Directors’ obligations as part of due diligence
- Directors’ obligations with regard to climate change
- Alignment of incentives to sustainability objectives
- Responsibilities of the financial sector
In the explanatory memorandum of the draft CSDDD, the EU Commission recalls that one of the five specific objectives of the directive is “(1) improving corporate governance practices to better integrate risk management and mitigation processes of human rights and environmental risks and impacts, including those stemming from value chains, into corporate strategies”. However, the proposal initially referred to as ‘Sustainable Corporate Governance’ has been presented with only a few elements to foster integration of sustainability and long-term thinking in corporate governance rules. It is important that corporate governance keeps pace with sustainable finance and the demands of stakeholders and investors, which themselves have supported the call on clarifying directors’ obligations.
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