Filip Gregor
Head of the Responsible Companies Team
The European Parliament approved last weekthe proposed college of Commissioners. Věra Jourová successfully faced the public grilling and will become the Commissioner for Justice, Consumers and Gender Equality. Due to the shift of competencies within the Commission, Ms. Jourová will have an opportunity to influence the governance and rules of the game for multinational corporations.
As part of the re-organization of the European Commission, a surprising and crucial change was made. Corporate Governance and Social Responsibility was removed from Directorate General for Internal Market and Services and transferred to Jourová’s Directorate for Justice. The British Institute of Directors, as well as its European equivalent, protested against the move. The purpose of the rules set in this area is to ensure, in the words of the IoD, that both small and giant companies are healthy, competitive and behave ethically.
After the 2008 financial crisis, the current model of corporate governance built on the maximization of shareholder value was criticized by many as a root cause of the crisis and a source of many undesirable behaviors such as fixating on short-term financial goals, accounting manipulation, avoiding tax duties and the inability of big corporations to behave responsibly towards their employees, consumers and society at large. According to various analysts, this behavior is destructive for corporations and the economy as a whole.
European states are struggling to deal with the macro-economic consequences of the crisis and considering potential reforms of the financial market. At the same time, the European Commission – and Ms. Jourová's department specifically – faces another great challenge: how to react to the causes of the economic crises, which are deep-rooted in our current approach to corporate governance. The good news is that relevant experts from business, academia and civil society have already started to discuss ways forward. At the EU level, this discussion is organised in particular by the “The Purpose of the Corporation” Project.
A second great challenge for the new Commissioner will be harmonization of access to justice. The last Commission discussed, for example, an EU initiative on collective redress in consumer and anti-competitive cases. A new dimension to this discussion added three years ago was the unanimous endorsement of the Guiding Principles for Business and Human Rights by all 47 members of the United Nations Human Rights Council. One of the three pillars of these principles is ‘Access to Justice’. EU Member States and the Commission have announced their commitment to implement them. At the European Commission, it should be Věra Jourová's Directorate General for Justice that will be responsible for this process. The Commissioner would be well-served to benefit from the existing debate in this field.
A conference hosted at EU Parliament on 12 November will present the results of the expert report “The Third Pillar: Access to Judicial Remedies for Human Rights Violations by Transnational Business” and engage participants in a discussion of the potential solutions to improve access to justice in the EU for business-related abuses of human rights and the environment. More information here.
Filip Gregor, Head of the Responsible Companies section, Frank Bold
Paige Morrow, Head of Brussels Operations, Frank Bold
The Parliament proposal shows that many of the concerns raised through Frank Bold’s research and engagement with policymakers are now entering the legislative mainstream. But the negotiations ahead will determine whether the final framework is capable of addressing the structural weaknesses that continue to undermine trust in the sustainable investment market.
The European Commission has published its draft Delegated Regulation revising the European Sustainability Reporting Standards (ESRS). The revision follows the Omnibus I Simplification Package and is presented as a burden-reduction measure. Some of it is - but a closer reading reveals a set of changes that go well beyond simplification, departing from EFRAG's technical advice and disregarding formal recommendations from the European Supervisory Authorities. Many of these changes have significant implications for the quality and comparability of sustainability data available to the market and public.
By approaching sustainability strategically, companies can turn corporate reporting into a powerful tool to identify their exposure to climate and social risks in their value chains, future-proof the resilience of their business model and build trust with investors, customers and partners alike.
