Corporate Sustainability Due Diligence
(Formerly: Directors’ Duties and Sustainable Corporate Governance)
ECGI took an active role in the consultation surrounding The European Commission's Corporate Sustainability Due Diligence Directive (CS3D) in 2021-2022.
Background:
Based on a study by Ernst & Young (EY) on directors’ duties and sustainable corporate governance published in July 2020, the European Commission considered broad-sweeping reforms of corporate governance which would deeply affect European companies. The EY study stimulated a lively discussion about the impact of short-termism. A number of scholars responded to the Commission’s consultation, urging policymakers to consider the full extent of the existing literature and established findings on the topics referenced. In an effort to address these gaps and to contribute to the current policy debate, ECGI convened leading scholars in a workshop format to discuss these issues.
The consensus from the ECGI workshop on 'Directors’ Duties and Sustainable Corporate Governance' was that the issue of 'short-termism' deserves a more sophisticated analysis and response. The participants cautioned against unlimited and widespread directors’ liability amendments which could damage European business, and offered a clear recommendation to the EU Commission to think beyond the study. Additionally they advised that regulation should instead focus on correcting market failure, through taxing externalities, curbing monopoly power and improving information disclosure; the rules on director duties and executive remuneration may increase the agency cost of corporate governance; Supply chain liability could curb the strategic use of limited liability for environmental and human rights degradation;
Please click on the 'Resources' tab on this page for more links to relevant comment from ECGI scholars and others.
