The Sustainable Corporate Governance Directive and what it means for your business

After being postponed twice, the EU Commission is expected to finally present its proposal for the “Sustainable Corporate Governance Initiative” on 15 February. The goal of the initiative is to embed sustainability as an integral aspect of corporate governance and trigger behavioural change in businesses by addressing due diligence for environmental and human rights impacts.

Is your company affected?

According to the proposal, the Directive will apply to companies with more than 500 employees and a net worldwide turnover of €150 million. In addition, companies with more than 250 employees and a net turnover of more than €40 million will have to comply with the new rules, if at least half of their turnover comes from a high risk sector, such as the textile industry, mining or agriculture.

The proposal is still subject to negotiations between the Council of the EU and the European Parliament, so these requirements may still change in the coming months.

What will change for you?

The goal of the initiative, similar to the German supply chain law (“Lieferkettengesetz”) is to mandate companies to introduce due diligence processes regarding potential or actual adverse impacts of their operations, value chains and business relationships on human rights, the environment, and good corporate governance. In addition, companies should publicly disclose their due diligence strategy, engage with stakeholders and implement an adequate complaints mechanisms for any stakeholders to voice concerns. In addition, companies affected should provide means of remediation for harm done.

How will the rules be enforced?

To ensure adequate supervision and enforcement of the rules, European member states will be required to establish an adequate supervision system and provide proportionate sanctions. The penalties in the German supply chain law can amount to up to 2 percent of the annual turnover.

How we help you

Together with experts from large, medium-sized and small companies with experience in sustainability reporting, we provide software solutions that makes it easier for you to implement the new directive.

• We simplify the collection of relevant data internally and along the whole supply chain, increasing efficiency and reducing effort. To help in particular with your legislative compliance of the Sustainable Corporate Governance initiative, we help you be in touch with your suppliers at any time.
• We help your suppliers oblige your information requests but allow them to protect business-critical information about their supply chain from being exposed to the data receiver at the same time, only showing one level up and one level down.
• We explain the new standards in an understandable way and help with the calculations. In this way, we relieve you of tedious work steps and simplify data entry.
• We facilitate data exchange with suppliers and ensure that necessary information from the supply chain arrives correctly and without additional effort.
• We can help you conduct risk-assessments of your supply-chain and install a complaints-mechanism.