The Netherlands Updates Code on Corporate Governance: Emphasis on Sustainability and ESG

Key Principles of the Updated Code

The updated Code on Corporate Governance for listed companies in the Netherlands highlights the significance of sustainable long-term strategy and Environmental, Social, and Governance (ESG) factors in corporate governance. The key principles of the Code are:

• Sustainable Long-Term Value Creation
  • Companies should have a clear and well-communicated strategy to create long-term value for shareholders while considering the interests of other stakeholders.
• ESG Factors
  • Companies should take into account ESG factors when making strategic decisions and report on their impact on the company’s performance.
• Stakeholder Dialogue
  • Companies should engage in an effective dialogue with relevant stakeholders to understand their concerns and interests.
• Diversity and Inclusion
  • Boards should be composed of diverse members with different backgrounds, experiences, and expertise.

Role of Supervisory Board and Management Reporting

The Code emphasizes the role of the supervisory board in overseeing the management board’s strategy and performance. It also requires the management board to report on its sustainability efforts and ESG impact.

Impact on Non-Listed Companies

For non-listed companies, compliance with the Code is not obligatory; however, following its principles and best practices can be beneficial for attracting investors, customers, and top talent. The Code’s tools may also play a role in M&A transactions, such as due diligence investigations and warranty schedules.

Conclusion

The updated Code reflects the growing importance of ESG factors in corporate governance and encourages companies to adopt sustainable long-term strategies that balance shareholder interests with those of other stakeholders.