The EU wants business to be sustainable. But it must empower companies to do that

October 26th, 2021 – Since its inception, the EU has been confronted with numerous crises and debates on how to advance a plan for a united and peaceful post-war Europe. In essence, what began as an imperfect economic union with the ultimate ambition of political integration evolved and transformed step by step into an organization spanning policy areas from climate change, environment and human rights protection to external relations and security, justice, and migration.

One of the most important recent developments is the current discussion on the prospects and policy options towards promoting an agenda on how companies can be directed and controlled in a sustainable way: so-called sustainable corporate governance.

The wave of corporate collapses and scandals that fueled the outbreak of the 2008 global financial crisis has led to renewed public attention towards the way corporations conduct business. The social contract that implicitly binds the companies with the rest of society has come under greater scrutiny. Subsequently, the conversation around the need for a sustainable corporate governance framework found new impetus in the EU’s post-COVID-19 recovery plan, which revolves around building a green, digital and shock-resilient European economy.

For this reason, the EU wants to incentivize corporations to contribute more to this goal by formulating certain policy measures that will spur companies to focus more on their long-term development rather than short-term financial performance. As these measures affect the core of the EU’s Company Law framework, they pose critical questions on how far policies under pressure to “build back greener and better” can go.

More…https://www.weforum.org/agenda/2021/10/european-union-sustainable-corporate-governance/

Written by World Economic Forum
Photo: Harvard Business School Online