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Sustainable corporate governance

TA-9-2020-0372 · P9_TA(2020)0372 · PE655.848

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Parliament's resolution on sustainable corporate governance calls on the Commission to introduce new EU legislation on due diligence and directors' duties, alongside a review of the Non-Financial Reporting Directive (NFRD). It asks to widen the NFRD's scope to all large listed and non-listed undertakings in the EU and to non-EU companies operating in the EU market, with mandatory EU reporting standards and mandatory audit of non-financial statements. It wants directors' duties redefined to include long-term interests, sustainability and wider societal interests, with a legal duty to define, disclose and monitor a corporate sustainability strategy. It calls for greater employee involvement, gender balance on boards, country-by-country tax reporting, and alignment of trade and investment agreements with EU environmental and climate objectives.

Key points

  1. Calls on the Commission to balance easing short-term pressure on directors with integrating sustainability into corporate decision-making, while ensuring harmonisation and flexibility.
  2. Welcomes the Commission's commitment to review the NFRD and says the revision must be consistent with the Disclosure Regulation and the Taxonomy Regulation.
  3. Wants the NFRD to cover all large listed and non-listed EU undertakings and non-EU companies operating in the EU market, and to consider including high-risk-sector SMEs.
  4. Says environmental matters in the NFRD should follow the Taxonomy Regulation and cover all pollution, and that social, employee, human rights and anti-corruption concepts should be precisely defined.
  5. Calls for a comprehensive EU framework with mandatory general and sector-specific standards, and for materiality to follow the double materiality principle assessed with stakeholders.
  6. Considers non-financial statements should be in the annual management report, subject to mandatory audit depending on company size and activity, and that the Statutory Audit Directive should be reviewed.
  7. Highlights that workers' representatives should help define and verify non-financial reporting, and calls for annual country-by-country tax reporting by certain EU companies.
  8. Calls on the Council to adopt its general approach on the Women on Boards Proposal and on the directive on disclosure of income tax information.
  9. Invites the Commission to consider revising the European Works Council Directive and to guarantee employees' right to continuing vocational training and lifelong education during working hours.
  10. Calls for a legislative proposal so that directors' duties include the long-term interest of the company, wider societal interests, employees and other stakeholders, and a duty to define, disclose and monitor a sustainability strategy.
  11. Says future legislation should cover all large listed and non-listed EU undertakings and non-EU companies in the EU market, with measurable, time-bound, science-based targets and transition plans.
  12. Wants companies to inform and consult stakeholders on sustainability strategies, with advisory committees for larger or high-risk companies, and conditions for companies receiving public money or carrying out redundancies.

Who is affected

  • Large listed and non-listed EU undertakings, and non-EU companies operating in the EU market, would face wider reporting and due diligence duties.
  • Small and medium-sized enterprises in high-risk sectors could be brought within the NFRD and future legislation.
  • Company directors would have duties covering long-term interests, sustainability and wider societal interests.
  • Employees and their representatives would gain involvement in reporting, decision-making and sustainability strategy advice.
  • Companies receiving State aid, EU funding or other public money, or carrying out redundancy plans, would face conditions on jobs, pay, taxes and dividends.

Figures and deadlines

  • 45-80 %: share of all food production in developing countries accounted for by women farmers.
  • 1.5°C: temperature increase limit the Paris Agreement pursues efforts to stay within.
  • 2050: climate neutrality target year referred to for aligning corporate activities.
  • first trimester of 2021: when the Commission intends to propose reviewing the NFRD.
  • third quarter of 2021: deadline the Commission set for a legislative proposal on an EU-wide online digital platform.