Dutch Companies to Consider Negative Externalities

Dutch listed companies must take responsibility for the negative effects that their business activities and supply chain have on people and the planet by aligning their business strategy more formally with planetary boundaries. This is not only about fighting dangerous climate change, but also, for example, about counteracting the loss of biodiversity and the need to think and act circularly.

This is one of the main recommendations of the research report commissioned by Eumedion and carried out by Maastricht University regarding the sustainability embedding practices in Dutch listed companies. Professor of Finance Rob Bauer, together with his colleagues Tereza Bauer, Mieke Olaerts, and Constantijn van Aartsen, examined the 2020 annual reports of 35 Dutch listed companies and interviewed 97 executives, supervisory directors and senior managers of these companies. Their research report was published on 26 October and officially presented and discussed at the Eumedion annual conference on 2 November 2021.

The study shows, among other things, that the Dutch listed companies regard sustainability more as an opportunity than a risk. Many companies do not communicate (much) about sustainability risks, such as waste, climate change and human rights issues, in their risk management sections.

The researchers also recommend that companies make their purpose statements more clear and meaningful and to connect them to their strategic objectives and targets. Furthermore, the study shows that the subject of sustainability is still barely embedded in the skill profiles of new supervisory directors.

In addition, companies communicate little about any required sustainability competencies for executives. This is in spite of the fact that the management literature indicates that executives, in particular, have a major influence on the creation of a corporate culture that supports both the strategic sustainability objectives and the financial performance of the company.

Finally, the researchers recommend professionalising and better structuring the dialogue with the various stakeholders and reporting on it more extensively. According to the researchers, companies should better inform stakeholders about due diligence procedures, the reliability of the reported non-financial information, sustainability measures in incentive schemes and key performance indicators with regard to waste, water and business travel.