Navigating ESG: the impact of new guidelines on corporate bylaws

20 December 2023
Thanks to Gianmarco Casciotta for collaborating on this article

With the new guidelines 2023, the “Comitato Interregionale dei Consigli notarili delle Tre Venezie[1]” (hereinafter “the Committee”) acnowledged the legitimacy of certain “sustainability clauses” within the companies’ bylaws.

In October 2023, the Committee addressed the issue of environmental, social, and governance (abbraviated as “ESG”) clauses within the context of the companies’ bylaws, aiming to reconcile the mandatory profit-making scope with the pursuit of socially beneficial purposes.

While it was long believed that the sole corporate responsibility for the management body was profit maximization, today, this principle still holds but must be balanced with other ESG interests.

The above consideration considers Article 41(2) of the Italian Constitution, which stipulates that any economic activity, i.e. the pursuit of profit, must not be carried out in conflict with social utility or in a manner that harms health, the environment, security, liberty, or human dignity.

In such a rapidly evolving environment, corporate bylaws have also become a test for companies’ compliance with ESG policies. For this reason, on October 2023, the Committee adopted six guidelines on ESG and sustainability. According to these guidelines, bylaws clauses are legitimate if they:

  • Dictate ethical and/or sustainability rules, even at the expense of profit maximization and production efficiency;
  • Provide for the conduct of economic activity with criteria other than maximum profit;
  • Allocate profits for sustainability purposes;
  • Require directors to consider the interests of stakeholders in administrative decisions;
  • Impose obligations on directors to consult with stakeholders;
  • Evaluate directors’ performance and a portion of their remuneration based on the sustainability parameters of the adopted policies;
  • Introduce an ethical approval clause for assuming corporate shareholdings.

These new guidelines offer new insights around sustainability and represent another crucial step toward recognizing companies that are no longer solely oriented toward the interests of shareholders but also toward those of stakeholders.

[1] The “Comitato Interregionale dei Consigli Notarili delle Tre Venezie” refers to the Interregional Committee of the Notary Councils of the Three Venices. It is likely a regional or interregional committee associated with notaries in the northern Italian regions historically known as the Three Venices – Veneto, Friuli Venezia Giulia, and Trentino-Alto Adige/Südtirol. This committee may play a role in regulating and overseeing notarial activities within these regions, ensuring adherence to legal and professional standards.

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