Elverding Conference 2023: Enhancing sustainable business and corporate regulation in the EU

The context for the conference was that the European Commission has adopted a range of regulatory initiatives in support of the EU’s green transition such as the Taxonomy Regulation, Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and Regulation on Sustainability-related Financial Disclosures (SFDR). The aim was to discuss what shareholders and managers could do to promote this transition.

Effective and sustainable approaches to active ownership

The first conference session focused on effective and sustainable approaches to active ownership and discussed how investors can effectively convey their long-term expectations on sustainability to companies. It included presentations from Prof. Sofie Cools (KU Leuven and Radboud University) and Prof. Rob Bauer (Maastricht University). 

A key insight from Prof. Cools was that there are notable differences between jurisdictions in terms of shareholder rights to submit proposals on sustainability-related matters, and that strategy is often a competence of the board rather than of the shareholders. These factors limit the potential role of shareholders in pushing for business sustainability. Prof. Bauer’s presentation showed that divestment from unsustainable companies does not seem to have a real-world impact, that investor engagement with companies on sustainability only succeeds in 20 percent of cases, and that this engagement is more likely to be successful when it is collaborative, intensive, and encompasses multiple activities.

Directors’ duties and social role of corporations

The second conference session turned to directors’ duties and the social role of corporations. It consisted of presentations from Prof. Paul Davies (Oxford University) and Prof. Jaap Winter (VU Amsterdam). 

Prof. Davies argued that changes in corporate purpose – such as those envisioned by Prof. Colin Meyer in his book Prosperity – are by themselves insufficient to lead to a sustainable transformation of business activities. He indicated that more structural changes would be required to enable these kinds of sustainable purpose, and suggested that it might be better to invest social and political capital on other, more effective projects. Prof. Winter, for his part, highlighted that companies, as members of society, need to consider the effects of their actions on other members. He suggested that this may require the re-imagining of corporations as human constructs, an increase in the group of stakeholders to whom the corporation has a duty of care, and a shift in company decision-making so that values, intentions, and convictions are integrated into choices and decisions.