This NGO policy briefing includes key recommendations to help clarify directors’ responsibilities to oversee sustainability that fully fit with existing company law and corporate governance frameworks across Europe.

The Sustainable Corporate Governance initiative, which was included in the Sustainable Finance Action Plan and the EU Green Deal, is set to provide solutions to two issues:

• the lack of a European legal framework for corporate human rights and environmental due diligence
• how corporate governance can foster sustainability and long-term thinking

The NGOs are presenting detailed recommendations for the latter part of the initiative. The involvement of boards is paramount to ensure that companies are able to consider and take the necessary strategic decisions with regards to the management of sustainability risks and impacts, and integrate them in overall corporate strategies and business operations.

More specifically, our recommendations tackle the need for coherence and alignment within the corporate and financial market regulatory framework in Europe. In this regard, connecting the dots between companies’ sustainability reporting and upcoming due diligence obligations requires effective governance and oversight from the company’s senior management and the board.

Our proposals are therefore divided into two categories to ensure an effective reform:

• Package 1: Board oversight over sustainability strategies, risks and impacts which is intrinsically connected to due diligence, and thus should be explored as part of a single proposal
• Packages 2 and 3 outline other supportive reforms in the field of corporate governance tackling alignment of incentives and board composition in order to promote good practice and provide safeguards against malpractice