Duties of the Supervisory Board with regard to ESG

The supervisory board is one of the three bodies of a stock corporation (AG). The focus of the discussion is often on the management and therefore the management board of the AG. But how do the ESG measures that have long since found their way into company law affect its rights and duties?

The supervisory board is entrusted with monitoring the management in accordance with Section 111 (1) AktG. In the context of the constant expansion of corporate duties in the area of ESG (for example through the CS3D or the CSRD), the requirements for the management are becoming increasingly complex. The question therefore arises as to what extent the supervisory board should fulfill this monitoring duty at all without special ESG expertise. Section 171 para. 1 sentence 4 AktG, for example, entrusts it with an "audit" of sustainability reporting (currently in accordance with the NFRD, soon in accordance with the CSRD), which will be extensive and require detailed knowledge despite the omnibus initiative.

Similarly, it must monitor the establishment, suitability and effectiveness of a compliance system to fulfill the due diligence obligations of CS3D as soon as it is implemented. The legislator has not yet reacted to the increasing requirements in the area of ESG, meaning that de lege lata the statutory rights and obligations of the Supervisory Board remain unaffected. The office of Supervisory Board member is designed as a secondary office. In fact, however, a certain level of sustainability expertise is required in order to be able to carry out the existing duties conscientiously. This is also provided for in the GCGC. Although the Code is not a binding set of rules, it has a certain effect via the "comply or explain" mechanism (161 §). It recommends ensuring that the board has the relevant expertise.

In practice, sustainability expertise is provided by sustainability committees and increased training and workshops. The role of the supervisory board is also changing from monitoring financial performance to supporting and monitoring the ESG transformation of the company.