The Interdependence Coalition has been formed as a response to the European Commission’s public consultation on “Sustainable Corporate Governance” and the efforts to embed sustainability into corporate governance at the EU level.
The climate emergency and social inequality are profound and pressing problems, thrown into sharp relief by the COVID crisis, that can only be solved if we harness the enormous potential of entrepreneurs, innovation and enterprise.
But for the past half-century, business has become separated from the communities it needs to serve. The failure to align the interests of shareholders with those of wider society and the environment has contributed to a set of enormous challenges that threaten peoples’ health, wealth and the natural world.
The world expects better of our businesses.
86% of people expect CEOs to lead on societal issues.
68% expect CEOs to step in when the government does not fix societal problems.
65% believe CEOs should hold themselves accountable to the public, not just to the board of directors or shareholders (Edelman 2021).
The Interdependence Coalition aims to transform the way we do business, so that every company registered in the European Union must take ownership of its social and environmental impact in its governance.
Influencing policy across the region is a long-term ambition that will require time, evidence, and strength in numbers. With the creation of the Interdependence Coalition, we aim to:
- Build a strong case for directors to have a broad duty of care for the impact of business; highlight on people and planet stakeholder governance and management through research and case studies from companies that are leading the way.
- Demystify the concept of stakeholder governance and management and equip more businesses with resources to engage their directors.
- Build a coalition of leaders across business, academia, law, policy making, and environmental practice to speak with one voice on the changes we seek in response to the European Commission’s Corporate Sustainability Due Diligence Directive (CSDDD) proposal on Sustainable Stakeholder Governance.
To date, our starting point is the Consultation on Sustainable Corporate Governance. Learn more about how the CSDD Directive consultation fits into the European regulatory context here.
Three Basic Principles for Stakeholder Governance as a Pan-European Directive
1. From voluntary to mandatory stakeholder governance
While corporate law in many EU countries does not inhibit directors of companies from considering stakeholders’ interest when undertaking decisions, these “permissive statutes” are clearly not enough to change behaviour at scale, or urgently. They have so far failed to create widespread consideration of stakeholders’ interests by businesses. This change must apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.
2. Aligning investment and corporate governance
Incentives are misaligned across the economic system. Today, more than ever, it is essential that companies and institutional investors are required to adopt sustainable corporate governance models to ensure that the capital markets look beyond individual company financial returns and take responsibility for the impact of businesses and investments practices on society and the environment.
3. Create EU-wide aligned requirements
Regulatory divergence calls for the adoption of EU-level sustainable corporate governance legislation, beyond existing environmental sustainability requirements. Directors should be legally obligated to consider and weigh up the interests of stakeholders alongside those of shareholders to determine the right course of action, and to be safely able to prioritise the interests of one stakeholder group over another, where appropriate.
“We need to make a swift shift in the EU to a stakeholder corporate governance model in which it is clear that board members must (are not merely allowed to) consider stakeholder interests in their decisions to meet their fiduciary obligations. This is a fundamental principle underpinning all other regulations envisioned by the EU as part of the Green Deal. The EU has a chance now to expedite this shift through a Pan-European regulation.
Let’s hope it will use the momentum to drive this regulatory and cultural change to a more responsible economy.”Wojciech Baginski, LL.M. MBA – advocate and ambassador of stakeholder corporate governance models