Sustainability is the new ethic. It is the path that marks the transformation towards a non-carbonised society. The European Green Pact, the Commission's Communication of December 2019, includes the objectives linked to the 2030 Agenda (SDGs) and establishes the principles of the sustainable and circular economy. Sustainability, as in all economic aspects, will also characterise the corporate governance framework of companies.

In this context, the European Commission (DG Justice and Fundamental Rights) had until 8 February last, a Consultation open in relation to the Sustainable Corporate Governance. This initiative aims to amend the Union's regulatory framework on company law and corporate governance. It aims to remove the short-term objectives of directors and shareholders by widening the circle of stakeholders and setting long-term objectives. This is intended to replace the vision of annual profit with the creation of sustainable value over time.

To this end, priority will be given to the management of social and human rights, climate change and the environment (biodiversity). The proposal is expected to be published in the first quarter of 2021 and the negotiating agenda foresees that it should be finalised in 2022.

The sustainable corporate governance initiative is additionally included in the Action Plan on a Circular Economy, Biodiversity and Climate Change. from farm to fork and would be part of the renewed strategy for financing sustainable growth.

The new proposal will mainly target companies listed on regulated markets. However, it extends its objectives in relation to environmental risks and impacts and human rights to small and medium-sized enterprises, as it understands that their value chains are not sufficiently integrated into corporate strategies. It also targets companies, including SMEs, from non-EU countries that provide services in the EU without a physical presence.

Moreover, the initiative follows the conclusions of the EY report on directors' liability:

https://op.europa.eu/es/publication-detail/-/publication/e47928a2-d20b-11ea-adf7-01aa75ed71a1/language-en

In doing so, it presents a criticisable approach insofar as it mixes corporate governance with the legally enforceable liability of directors and senior management. Liability that is difficult to articulate, objective and subjective, aimed at requiring capital companies that do no harm while corporate directors should integrating more interest in corporate decisions.

From a constitutional economic perspective, the question arises whether the extension of the circle of stakeholders and of objectives other than the shareholder interests of the shareholders does not amount to an effective expropriation of the right of ownership without legal basis or compensation.

The initiative is complemented by related legislation:

Firstly, Directive 2014/95/EU on disclosure of non-financial information on diversity by large companies and certain groups.

It was transposed into Spanish law by Law 11/2018 of 28 December (from RDL 18/2017). Its successive articulation highlights that the supervision of the entire process cannot be delegated to the Council (529 ter).

A new, amending proposal from the Commission is expected this quarter.

Secondly, Directive (EU) 2017/828 amending Directive 2007/36/EC as regards the promotion of long-term shareholder engagement. 

Currently in preliminary draft form, it will be processed by emergency procedure according to the agreement of the Council of Ministers. Its essential elements refer to the investor identity and the obligation on collective investment undertakings to make public their strategy for involvement in listed companies, thereby increasing transparency. For the first time, the figure of proxy advisors is regulated (proxy advisors) and the transparency of related party transactions and directors' remuneration.

In Spain, advantage will be taken of the transposition to introduce into Spanish law the actions of loyalty, known from French and Italian legislation (where they are criticised) and which are unlikely to withstand the criticism of the French and Italian legislation.he partner parity test (Art. 85 Dir. 2017 /1132)

In addition, Directive (EU) 2019/1937, "(EU) No 2019/1937 ", is in the process of being transposed into national law.Whistleblowing o (whistleblowing - internal whistleblowing channel and whistleblower protection for breaches of EU law).

It is a complex rule, which falls within the scope of compliancewhich has important labour aspects and difficult solutions. Thus, the system of sanctions in the event of non-compliance with the protection measures is not provided for in the Directive, but is delegated to the internal legislation of the Member States, under the premise that these sanctions must be effective, proportionate and dissuasive. Its transposition deadline is 21 December 2021.

Finally, Regulation (EU) 2020/852 on establishing a framework to facilitate sustainable investment. The regulation emphasises a systemic approach to environmental sustainability challenges while targeting the so-called "sustainable investment". "circular economy". It is an economic system in which the value of products, materials and other resources in the economy lasts as long as possible, enhancing their efficient use in production and consumption, thereby reducing the environmental impact of their use, and minimising waste and the release of hazardous substances at all stages of the life cycle, where appropriate through the application of the waste hierarchy.

In sum, it can be concluded from this policy context that the Europe that will be reborn after the pandemic is firmly committed to sustainability in the context of a new, socially sensitive, circular economy.

For company law, the model that is being established goes beyond corporate social responsibility, within the objectives of the Green Deal and the 2030 Agenda Goals (SDGs).

The reformulation of the responsibility of directors and senior management linked to governance will be an issue that will make it difficult to negotiate the directive.

It will be necessary to await the publication of the responses to the consultation and the final text of the proposal in order to adjust its assessment.