PORTUGAL Trends and Developments Contributed by: Miguel Durham Agrellos, Paulo da Rocha Pichel, Ricardo Pereira Amaro and Francisco Duque Lima, Durham Agrellos
Durham Agrellos Avenida da Boavista 3265, 3.1 4100-137 Porto Portugal Tel: +351 226 167 260 Fax: +351 226 167 269 Email: geral@da.pt Web: ww.da.pt
Sustainable Stewardship: ESG Interaction With Entrepreneurial Families An emerging trend for the private wealth sector The environmental, social and governance (ESG) agenda, once viewed as limited to the corporate law domain, is evolving to provide new benchmarks for corporate conduct and reporting, interfacing with entrepreneurial families that operate on long-held, often informal values of stewardship and multi-gen - erational legacy. This intrinsic, long-term orientation of family busi - nesses is now interfacing with the EU’s framework for ESG compliance, offering valuable insights for advis - ing private clients, managing future risks and identify - ing new opportunities for competitive advantage. This presents both operational considerations and strate - gic opportunities to formalise a family’s core values into a demonstrable asset. The ESG Framework and its de facto application and impact for entrepreneurial families The EU is committed to a fundamental reorientation of its economic policy, aiming to embed sustainabil - ity within the core of market activity. This agenda is operationalised through a robust legal framework, comprising core regulatory instruments, namely, the European Sustainability Reporting Standards Regu - lation (ESRS), the 2022 Corporate Sustainability Reporting Directive (CSRD) which amends the 2013 EU Accounting Directive, the 2024 Corporate Sus - tainability Due Diligence Directive (CSDDD), the 2019 Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation (establishment of a framework to facilitate sustainable investment).
While these instruments primarily target large corpo - rations and financial institutions based on specific thresholds, they were designed to create a powerful cascading effect that extends their de facto applica - bility to a much broader range of economic actors, including family-owned businesses that fall outside their direct jurisdictional scope. The CSRD establishes a new and significantly more rigorous standard for corporate transparency. Its scope is vast, applying to all EU companies that meet at least two of the following three criteria: (i) more than 250 employees, (ii) a net turnover exceeding EUR50 million, or (iii) total assets over EUR25 million. The directive’s reach is also extraterritorial, capturing non- EU parent companies with substantial EU operations. At its heart, the CSRD mandates reporting accord - ing to the principle of “double materiality”, which includes (i) impact materiality covering the undertak - ing’s actual or potential direct impact on people or the environment and (ii) financial materiality covering the sustainability-related financial risks and opportunities that can have a material influence on the undertak - ing’s development, financial position, financial per - formance, cash flows, access to finance or cost of capital. This double materiality fundamentally alters the scope of corporate disclosure, demanding a holis - tic and integrated view of financial and non-financial performance. The CSDDD imposes a mandatory obligation on large companies to conduct comprehensive due diligence to identify, prevent and mitigate adverse human rights and environmental impacts. This duty is not confined
487 CHAMBERS.COM
Powered by FlippingBook