Sustainability is currently developing very dynamically. On a strategic, operational and legal level, ESG factors are taking up more and more space in club management and influencing key decisions of the management boards. Stakeholders, such as club members, sponsors and investors, seek their influence in ESG-related club decisions. This article gives an overview of current legal developments with ESG relevance in Europe.
By Andreas Hecker, Hoffmann Liebs
1. Sustainability Expertise In Advisory And Supervisory Boards
Sustainability / ESG is no longer a topic that is merely delegated to departments of clubs and companies. It influences strategies and strategic decisions and thus belongs to the responsibility of the management bodies, of course, supported by employees or specialist departments who prepare decisions, implement measures and develop processes. Some clubs include respective competences already explicitly in titles of board members, e.g. Werder Bremen. But it is not only in the management body that appropriate expertise is needed. In order to ensure proper supervision and advisory of management bodies and managing directors, corresponding expertise should also be available in the supervisory boards and advisory boards, and this should be taken into account in personnel decisions and elections of the clubs. A recent development in this regard is the new sustainability advisory board at Eintracht Frankfurt.
2. CSRD (Corporate Sustainability Reporting Directive)
The CSRD has been adopted by the EU in 2022 and will now be transposed into national law by the EU member states. This EU directive expands the content of the legal sustainability reporting obligation, creates a mandatory external audit and at the same time significantly expands the group of addressees of the reporting obligation over the coming years. A stronger standardisation of the sustainability reports in the EU is to be achieved by EFRAG developing a model framework for the preparation of reports under CSRD. From 2026 all large companies in the meaning of EU accounting law must publish corresponding reports annually together with their financial reporting (companies must report in accordance with the CSRD if they meet two of the following three criteria). The first reporting year for aforementioned large companies will be 2025. This will then also affect, among others, large EU football clubs, sponsors (also from third countries) and other stakeholders in sport.
3. New DFL Licensing Criteria
Last year, the DFL took a decisive step towards embedding sustainability aspects in the licensing process of football leagues. Not only were the licensing regulations amended to include 117 minimum criteria from three subject areas in a sustainability guideline. The guideline covers the areas of “Club leadership and organisation”, “Environment and resources” and “Stakeholders”. The criteria will be part of the licensing procedure for the 2023/24 season for the first time, with a gradual entry into force planned. In addition, DEKRA Assurances Services GmbH will be commissioned as an external auditor for the sustainability licensing aspects for the next three seasons. Furthermore, there will be both a “Sustainability Commission” and a “Sustainability Assembly” in the DFL organization structure.
1. Say On Climate
A current international trend among companies is the inclusion of so-called “Say on Climate” resolutions on the agenda of annual general meetings. For this purpose, the respective management board develops plans for the short-, medium- and long-term targets for the reduction of climate-damaging emissions and specifies a time frame and the associated costs for the reduction measures. This information is presented by the board to the general meeting so that it can discuss and decide on it. The (dis)approval resolution has no direct legal effect or obligation for the management board as a legal consequence. However, it can have an indirect external effect (including negative visibility). Not only in the case of listed football clubs, this topic can also be put on the agenda of general and members’ meetings in the future.
2. Building In Existing Structures
In the past, the focus of sustainable infrastructure construction, including stadiums, was on new construction with sustainable building materials, future energy generation, etc., but now the topic of “building in existing structures” is increasingly coming into focus. Due to the high CO2 pollution caused by construction measures, a contribution to climate protection should be made through the conscious use of existing resources. This is also reflected in the discussion about the evaluation of new buildings under the aspect of deconstruction and disposal of existing (sports) facilities. In this connection also the UEFA directive on sustainable infrastructure from November 2022 should be taken into account. This directive represents one of the eleven aspects of the UEFA Football Sustainability Strategy (“strength through unity”).
1. Say On Human Rights
Similar to the above-mentioned “Say on Climate” resolutions, another type of member vote has found its way into general meetings and general assemblies. So-called “Say on Human Rights” resolutions concern approval resolutions of the general assemblies of clubs and companies on human rights aspects, e.g. in the context of foreign trips of teams or the selection of sponsors. Last year’s general meeting of FC Bayern Munich can be taken as an example of the discussion on such resolutions, where sponsorship by Qatar was the focus of attention and led to legal disputes between the club and its members before German courts.
1. Money Laundering
In the EU Commission’s report on money laundering risks of October 2022, professional sport is identified as a high-risk sector. The Commission explicitly mentions that sport is used by criminals to launder money and generate illicit proceeds, with football being highlighted. To reduce these risks, the commission calls for better resources and training for the players involved, tighter controls and improved transparency at all levels, i.e. from player transfers to the ownership of clubs. It also seeks further action in this regard. In this context, clubs and other stakeholders in sport should be aware of and comply with the reporting obligations to the national transparency registers in the EU, which are subject to fines.
Following the EU Whistleblower Directive, which had to be transposed into national law by 17 December 2021, many member states have already implemented the obligations for whistleblowing reporting systems. After the German Bundestag passed a Whistleblower Protection Act on 16 December 2022, the German Bundesrat refused the approval on 10 February 2023. It is currently open whether the legislative package will be adapted once again or whether a complete rewrite of the legislation is imminent in Germany. In principle, not only companies but also public corporations and registered associations are covered by the proposed German Whistleblower Protection Act, whereby the establishment of reporting systems applies to more than 250 employees after the law comes into force and employers with more than 50 employees are given an implementation period until 17 December 2023. Therewith, this obligation will include football clubs and other stakeholders of the sports sector.
3. Governance initiatives in France and England
At the end of February 2023, the English Ministry of Sport had published a paper entitled “A sustainable future – reforming club governance”. Especially under the impression of the developments of the past years (financial turbulences at individual clubs (Bury, Macclesfield Town, Derby County) and the discussion about the SuperLeague), English football is to be better protected under governance and sustainability aspects and the rights of fans are to be strengthened. The French Minister of Sport presented plans for an Ethics and Governance Committee at the beginning of March 2023, after French sport was recently rocked by several crises and scandals. The committee is to help strengthen ethical principles, democratisation and the protection of athletes.
About the author:
Andreas Hecker is a lawyer and partner at Hoffmann Liebs and advises clubs and companies primarily in company, capital markets and association law, including corporate governance and sustainability aspects. He is member of the Sports Governance Kodex Commission.