FERMA has called upon the European Commission to consider the views of risk managers in its reflections on sustainable corporate governance

FERMA has submitted its response to the European Commission’s public consultation on sustainable corporate governance, highlighting that any initiative on sustainable corporate governance will have a direct impact on the risk profile of an organisation.

It is therefore crucial that the voice of the risk management profession is heard in the Commission’s reflections, it said.

The association is against the implementation of a mandatory duty of supply chain due diligence at EU-level.

In its position paper, FERMA said: ”It is our view that existing processes and frameworks such as ERM already encourage companies to look at the ‘risks’ and ‘impact’ in companies’ operations throughout the supply chain.

”It is our view that this problem – the possibility that there are adverse impacts on ESG in the supply chain – is best addressed by further encouraging companies to develop and maintain a holistic risk management approach.

”If the EU wishes to act in this area, FERMA is of the view that guidelines and/or standards would be the best instrument at this stage.”

Regarding taking account of stakeholder interests as part of the Directors’ duty of care, FERMA is of the view that further discussion and analysis is required.

Since the launch of the EC’s Action Plan for Financing Sustainable Growth in 2018, sustainable corporate governance has been a recurring theme.

Embedding sustainability into the corporate governance framework is considered a key driver to ensure companies focus on long-term sustainable value creation rather than short-term benefits.

The challenges to businesses of COVID as well as the increasing extreme climate events has reinforced the concern that businesses must be more resilient to be sustainable.

The Commission’s research into sustainable corporate governance (culminating in its July 2020 Corporate Governance study) argues that “…many companies still focus too much on short term financial performance compared to their long-term development and sustainability aspects …”

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