The Make-or-Break Decade for the SDGs has begun

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The company has a
compliance or risk
management
department in place.
But whether it works
and can actually
implement its
responsibilities in the
spirit of company rules
or code of conduct
is usually not
investigated.
What will the regulations change for CEOs and supervisory boards in
terms of liability?
Kai Michael Beckmann: Sanctioning is an issue here. The
central message of the Non-Financial Reporting Directive is
plain and simple. In the future, auditing bodies within the
company will be required by law to give equal consideration
to financial and non-financial statements. Up until now, supervisory
boards were able to get out of their responsibilities
in this regard. They did fulfill their official audit obligations,
but they had an auditor perform a limited assurance review
– which, up until now, was sufficient. However, in the future,
the auditing committee must give equal consideration to
both perspectives, meaning that the committee now needs to
guarantee the involvement of “non-financials” in the internal
control system and in risk management. This also has to do
with the assessment of adequacy and effectiveness – a real
increase in quality. Furthermore, the functions of the supervisory
and executive boards or the CEO must be concretely
laid out in the creation of sustainability reporting. From now
on it must be specified who has which tasks and what roles.
This ensures a clear overview of who carries responsibility
in specific areas, which, in turn, has consequences for the
executive board’s balance sheet oath.
A follow-up question to effectiveness. What exactly is new here? Many
readers are not yet familiar with the term. You often hear the term
“materiality” and we are familiar with the term “adequacy” from the
discussion surrounding due diligence. But perhaps you should explain
the idea of effectiveness.
Beckmann: In order to understand what effectiveness means
in this context, the term adequacy needs to be clear. Adequacy
here simply means that something is present. The company
has a compliance or risk management department in place.
But whether it works and can actually implement its responsibilities
in the spirit of company rules or code of conduct
is usually not investigated. However, assessing effectiveness
does just that. Let’s take Volkswagen and the diesel scandal as
an example. Compliance and risk management departments
were in place, yet they couldn’t avoid the scandal. The control
mechanisms weren’t effective because they were eclipsed by
a corporate culture in which goals, other than sustainability,
took precedence.
28 Global Goals Yearbook 2021