Burdensome EU sustainability rules not needed, FERMA insists

Further burdensome EU-wide requirements for sustainability risks governance would only add administrative costs and could even damage companies’ competitiveness, according to the Federation of European Risk Management Associations.

FERMA says enterprise risk management and other existing frameworks are perfectly sufficient for the management of risks relating to environmental pollution, human rights violations and climate change.

This message lies at the heart of FERMA’s response to the recent public consultation run by the European Commission on sustainable corporate governance – for many years a key focus area for the risk federation.

“Any initiative in the area of sustainable corporate governance will have a direct impact on the risk exposures (or risk profile) of an organisation – the primary concern of the risk manager – which is why it is vital our voice is heard in this topic,” the organisation’s Sustainability Committee stated.

Whilst it welcomes the EU objective of instilling long-term corporate sustainability in corporate governance, FERMA prefers the ‘minimum process and definitions approach’ with requirements that are risk-based and proportionate to the nature, scale and complexity of the organisation.

“Such processes also steer thinking away from a short-term perspective and help map out likely impacts on a wide variety of stakeholders,” it continued.

FERMA believes that directors should take account of stakeholder interests and maximise social and environmental performance in tandem with financial returns. At the same time, it says there should be a clear perimeter to the type of stakeholders when it comes to defining directors’ duty of care.

When it comes to potentially damaging effects on corporate sustainability through the supply chain, FERMA argues that the best approach is to further encourage companies to maintain a holistic risk management approach. If the EU wishes to act, it should support guidelines and standards, not create new mandatory requirements.

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