Corporate Governance for Sustainability. The Necessary Reform of EU Company Law

The topic of this chapter is what taking Article 11 of the Treaty on the Function of the European Union seriously could mean for European company law and corporate governance. Article 11 TFEU provides a legal basis for including environmental protection requirements in all policies and areas and requires that this is done to the extent necessary to secure sustainable development. The chapter is based on three premises: Firstly, sustainable development cannot be achieved without the contribution of business. Secondly, business can with existing knowledge and technology shift away from business as usual and onto a sustainable path. Thirdly, business is not doing enough on a voluntary basis. Therefore legal reform is necessary. This chapter aims to draw up the main aspects that should be covered in a reform of EU company law and corporate governance, to ensure that European companies become a part of the solution to this convergence of crises that we face with interlinked environmental, economic and social consequences. The position is not taken that reforming company law is the solution to all problems. Rather, it is a crucial piece of the jigsaw puzzle of sustainability that we need to get into place. It is also a piece that has tended to be ignored in the debate on how to encourage companies to behave in an environmentally and socially friendly manner. Company law has a crucial role to play in the transformation towards sustainability because it provides the legal framework for the internal workings of the company, including its decision-making. This tentative reform proposal springs out of a research project that has had the deeper integration of environmental concerns into the decision-making of companies as its aim. Envisaged as the basis for a proposal for a new EU directive, and in recognition of the inextricable interconnectedness of environmental, social and economic aspects of business, the chapter presents ideas for a reform that is holistic in the sense that it covers all three dimensions. This chapter discusses three necessary and interlinked questions as a matter of EU law: Is there a legal basis in EU law for fundamental company law reform, does the subsidiarity principle allow for these issues to be dealt with on EU level and does the proportionality principle allow for a proposal of the scope and content presented here? This also entails a brief discussion of the work the EU already is doing. After concluding that there is legal basis and that action on EU level is indeed necessary, the chapter presents key aspects of a possible reform of EU company law. Although such a proposal is bound to meet resistance there are also some interesting tendencies that give hope that the time may be right to discuss these fundamental issues with a fresh perspective