ESG and EU Law: From the Cradle of Mandatory Disclosure to More Forceful Steps

Following several declarations of intent since the turn of the century, EU lawmakers have been quite active in building an EU-wide framework that incorporates environmental and social concerns in corporate governance. This chapter will describe the context in which such framework was born and its first legislative acts—which essentially impose on certain categories of EU-based companies mandatory disclosure duties of various sets of information pertaining to environmental and social issues, ranging from internal policies to those issues to identification of environmental and social risks. Then, attention will be given to the potentially game-changing legislation that is just around the corner, in which the transition from a mostly disclosure-centred ESG regime to a more forceful framework can be noted, which can bring about seismic changes in the way we look at central tenets of corporate law such as directors’ duties and corporate purpose. Furthermore, this chapter will include reflections on the pertinence of the assumptions that served as justification for the web of disclosure requirements already in force, and whether a delicate balance has been struck or whether the EU legislator’s aims have been misguided, and on the pertinence of actions still to come. This chapter is intended to be a holistic overview of the framework in force and to identify its driving forces (not analyse all legal acts in detail) while anticipating and reflecting upon what is to come.