Sustainable corporate governance must be SME-friendly

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The Commission is working on an initiative for sustainable corporate governance. VDMA responded to the consultation that an EU-initiative should be implemented in an SME-friendly and manageable way.

VDMA responded on 8 February 2021 to a consultation of the EU-Commission on the proposal for a initiative on sustainable corporate governance. This consultation consists of several parts, including a section on the duty of care of directors and a section on a binding due diligence duty of companies.

In the part on the duty of care of the company management, VDMA emphasized that the identification of all stakeholders and a well-functioning risk management are important prerequisites and are thus in the own interest of the responsible company management. Therefore, there is no need for regulatory action here at EU level to create an incentive. In any case, the companies in the mechanical and plant engineering sector, which are predominantly medium-sized family-run enterprises, do not focus solely on short-term success. Even capital market-oriented companies in our sectors often have the majority shares in family hands and thus feel committed to sustainable entrepreneurship.

Regarding the mandatory due diligence of companies, VDMA stresses that a EU-wide uniform framework aimed at clear criteria, definitions and standards, manageability of processes as well as possibilities of influence is preferable to a national patchwork. Focusing on the direct supply chain, starting outside Europe, can be a building block here. VDMA also believes that the user group for such EU-wide regulation (like the CSR Directive) should only be capital market-oriented large companies. SMEs and larger companies that are not capital market-oriented should be excluded from the scope. In addition, due diligence must be limited to the prevention of human rights violations and there should be no civil liability.

VDMA has also pointed out that many companies already have codes of conduct and supplier contracts to commit themselves and their partners to respecting human rights.

Further information:

Please find the VDMA Positionpaper Due Dilligence as attached PDF to download.

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