Read our response to the European Commission’s proposal on Sustainable Corporate Governance here.

Our letter to the European Commission on Directors Duties and Sustainable Corporate Governance Directive

First published on February 8, 2022

Dear Commissioners Jourova, Reynders and Breton,

RE: Directors Duties and Sustainable Corporate Governance Directive

We understand that the much delayed Sustainable Corporate Governance Directive is now due to be adopted on 23rd February. We welcome this important piece of future legislation in the architecture to support sustainable behaviour across our economic system. However, we are very concerned by reports that the extension of Directors Duty of Care may well be weakened to relate only to their Due Diligence obligations which will be defined clearly in this directive.

We see this as a huge risk to the intention of the plethora of regulations that will support the EU Green Deal and the aims for a more equitable inclusive society. It makes no sense to have a directive on reporting against sustainability, and a directive on investing sustainability, whilst not ensuring that the companies that are reporting and receiving investment are mandated to behave in an aligned, sustainable manner, across all their activities.

We understand the concerns towards competitiveness; however, we reject these wholeheartedly – here we call on evidence we have gathered from the B Corp movement. There are now over 4,600 B Corp companies of all sizes and sectors around the globe of which nearly 800 are in Europe, including representation in Germany, France, Switzerland, Spain, Belgium, Netherlands, the Nordics and more. B Corps are a vital source of information to draw on here, as they have all voluntarily changed their company articles to embed a duty of care to consider the interests of all stakeholders in the running of their businesses. B Corps also reach a high standard in social and environmental performance and must recertify every three years. The average growth rate of European B Corps whilst holding this certification, that have recertified at least once, was over 30% per annum. This growth rate way exceeds the comparative SME growth rate in European member states in the last half decade.

We therefore implore the Commission to include a broad definition of the directors duties in this directive; there is a real window of opportunity for the EU to drive behaviour change globally through altering the norms and expectations of business. It is no longer appropriate or possible for those that voluntarily adopt a broad duty of care in considering all stakeholders in the running of their companies, to carry the load for all the other companies, for whom short term gain isrewarded. If regulation aligns the mandated duties with business incentives, targets, investment criteria, strategies and operational plans, reporting criteria and staff appointments and compensation, then as a continent we can meet our broad aims to be a climate neutral, equitable economy that leads the world in sustainable development.

We are not alone in this plea and have joined forces with hundreds of other leaders demanding action, including this call for effective EU corporate accountability legislation and for the variable remuneration of executive directors to be linked to the achievement of sustainability objectives.

The B Corp movement has pioneered this concept for you to make this bold decision easier: we offer it to you to adopt and adapt it for your broader noble ambitions. We ask this of you for the benefit of all Europe’s stakeholders – both those living and those yet to arrive.

Kind regards,

Katie Hill
CEO and Chair of the Board of B Lab Europe
Co-founder of the Interdependence Coalition

Wojciech Baginski
Founder of Impactiv, a law firm focused on B Corps and sustainability
Co-founder of the Interdependence Coalition

See the full list of 100+ European organisations who support the Interdependence Coalition.