The first three months of 2024 were dominated by ESG developments, with the Securities and Exchange Commission (SEC) finalizing its climate reporting rule on March 6 and the EU Council ratifying the Corporate Sustainability Due Diligence Directive (CSDDD) less than two weeks later on March 15. Globally, efforts to eradicate slave labor from supply chains remain a regulatory priority.

Meanwhile, sanctions, FCPA and export control enforcement continue to be hot topics.

While many companies have long been collecting and reporting climate-related data, sustainability officers will need to pay close attention to the slate of new rules coming out.

“2024 presents a turning point in the ESG regulatory landscape, with various laws, including reporting requirements, coming into effect,” noted law firm 

 in a client memo, which also predicted more private litigation against reporting companies above and beyond government enforcement.

Among the rules entering the data-collection phase before reporting requirements kick in is the 

EU’s Corporate Sustainability Reporting Directive (CSRD)

. Not to be confused with the CSDDD, the CSRD includes climate reporting requirements tougher even than the SEC rule and applies to companies with a modest amount of revenue generated within the EU.

While the SEC’s rule was hotly anticipated, preparing for it was made more difficult by speculation as to what might be dropped from the proposed rule, as well as planned lawsuits from groups opposed to its main objectives.

, which derive from a company’s value chain including customers of its product, were excluded from the final requirements as some investors raised concerns that methodologies for calculating them were inconsistent.

Companies may not avoid Scope 3 for long, however. 

 and the CSRD require disclosure of the data and most investors continue to request it from some sectors. Indeed, the global recommendation of the 

International Sustainability Standards Board

understand the implications of the SEC rule

 featured a deep dive on the subject, while Diligent has also produced 

Companies that are already advanced in their ESG reporting journey are at the stage of navigating pain points to stay in compliance with increased regulation. — 

Russell Dover, Principle Solution Design at Diligent

Following the adoption of the rule, a dozen long-prepared lawsuits were filed challenging the SEC’s authority. Most argue that the SEC exceeded its authority and cannot require companies to make non-financial disclosures, although at least one argues the SEC did not go far enough.

The SEC has stayed the rule temporarily as a practical matter, allowing the challenges to be consolidated. But it intends to fight vigorously to keep the rule intact. According to 

, “The SEC believes that the final rule is a lawful exercise of its regulatory authority, but a voluntary stay will allow the consolidated cases to focus on the merits of the appeal and avoid regulatory uncertainty in the meantime.”

Supply chain and third-party due diligence continues to be of critical importance to both public and private companies, driven by a focus on forced labor and sanctions enforcement.

The first quarter of 2024 saw a 4% increase in the number of sanction records globally, according to Diligent data. Those increases were driven by a focus on individuals in Moldova and connected to Hamas, in response to the wars in Ukraine and the Middle East, respectively.

According to the FCPA Clearinghouse, a joint project between Stanford Law School and Sullivan & Cromwell, the typically slow start to the year in FCPA enforcement activity was in line with 2023. However, its 

 cited a focus on international commodity trading companies that allegedly paid bribes in Latin America and Africa, plus a new whistleblower reward program from the Department of Justice designed to bring the agency into line with the SEC and other bodies.

Separately, the DOJ reported on the first year of its 

Disruptive Technology Strike Force Efforts

, citing cases related to exports to Russia, China and Iran, and partnerships with international governments and private sector parties. Export controls, along with sanctions, are expected to be a focus for enforcement actions in the near term.

Ratification of the CSDDD is on track with the EU Council agreeing a scaled back proposal in March. Amnesty International Policy Advisor Hannah Storey said that despite the new rule affecting around 30% of the companies covered by the initial scope of the rule, “this legislation remains a vital step toward establishing the principle in EU law that businesses must address human rights risks in their operations and value chains.” The rule now goes to the EU Parliament for approval.

 to how the rule affects your supply chain operations. And for an overview of other supply chain rules, including the 

California Transparency in Supply Chains Act

, the U.S. Uyghur Forced Labor Prevention Act, 

Canada's Fighting Against Forced and Child Labour in Supply Chains Act

Diligent was out in force at Compliance Week in Washington D.C. at the beginning of April, where Principal of Solution Design Russell Dover noted that two big topics were 

“While there’s a lot of excitement about potential new applications for AI that can help compliance teams, there’s also an understanding of the need to fully vet any AI solutions and compatibilities with other software so as not to introduce additional risk,” he said. “Using AI in a trusted and vetted platform is a common approach.”

Dover moderated a panel discussion on a Proactive Approach to ESG and said, “Companies that are already advanced in their ESG reporting journey are at the stage of navigating pain points to stay in compliance with increased regulation. These include the reliability of future projections, differing materiality standards between U.S. and EU rules, and practical issues such as increased volumes of customer surveys.”

Diana Kelley, the chief information security officer at Protect AI, presented to the conference on the importance of applying compliance to the rollout of artificial intelligence tools such as machine learning (ML), including risk assessments, policies and procedures, and monitoring.

“Awareness of the AI and ML visibility problem is increasing, I know companies want to do the right thing,” Kelley told Diligent after the event. “I’m very happy to see that compliance teams – both internal and external audit – are looking at AI and ML security. And excited to know that this was of enough importance for Compliance Week to invite me to come and speak about the need for auditability of AI and ML and that people wanted to have the conversation.”

Learn more about improving your compliance program with Diligent One

 streamlines your risk management, ESG reporting and compliance programs by delivering best-in-class solutions and centralizing all of your GRC activities in one place. Find out more about how software from Diligent can enhance your approach and ensure you comply with your due diligence obligations, stay on top of climate reporting requirements and get AI-ready 

Q1 2024 compliance overview: Navigating climate risk, supply chain regulations and AI challenges

Activism is off to a brisk start in Italy this year, while the country’s unique protections for minority shareholders continue to provide a popular path to board representation.

As of April 15, two Italian companies have been subject to campaigns involving primary- and partial-focus activists this year, the same number as the entirety of 2023, according to Diligent Market Intelligence’s 

 data. Four of the eight campaigns involving such activists, which included an appoint personnel demand since 2019, have been at least partially successful.

In the wider European region where a total of seven campaigns have been initiated by dissident investors in the first quarter, the level of activity in Italy is largely on par with the U.K., while France and Germany have each recorded a single campaign in the period.

First implemented in 1994, Italy’s voting system “voto di lista”, also known as slate voting, ensures that directors nominated by minority shareholders are guaranteed seats on both the board of directors and the board of statutory auditors at all Italy-listed companies.

Given that a significant portion of companies in the region are primarily owned by founding families or controlling shareholders, the mechanism is considered extremely valuable in holding companies accountable to smaller shareowners.





At Italian annual meetings, shareholders are given the opportunity to vote for slates of candidates. Controlling shareholders present a slate of candidates, while minority shareholders can also submit so-called “minority lists.”

Any shareholder which owns a certain amount of the company’s share capital – that varies between 0.5% - 4.5% depending on market capitalization - can submit a slate, and investors also have the option to pool their holdings to reach the required threshold.

Investors can only support one bundled slate and cannot vote for directors individually. Those who put forward slates must rank their nominees in order of preference.

To ensure minority shareholders secure some form of board representation, at least one member of the board of directors and the chair of the board of statutory auditors are elected from the slate that received the second-most votes after the majority slate. Company bylaws may allow for further seats reserved to minorities, and current best practice provides for up to 20% - 33% of board seats.

In 2021, 56.1% of Italy-listed companies had at least one minority-appointed director on its board, up from 36.5% in 2011, according to 

 from Italian securities regulator Commissione Nazionale per le Societa e la Borsa (Consob).

“The ‘voto di lista’ mechanism benefits investors who, as minority shareholders, can have their representatives elected to the board and thus are allowed to shape the company’s governance,” Natalia Bagnato, Italian partner at U.S. law firm Boies Schiller Flexner (BSF), told DMI in an interview. “It also benefits shareholders looking to invest in a company characterized by a widespread and fragmented ownership structure and those investors – especially institutional – seeking transparent and articulated mechanisms to select the best candidates to run the company.”





Although the mechanism gives minority shareholders a louder voice and greater influence on the board, it is also considered to have its own challenges.

The fact that investors can only vote for nominees from one slate limits their ability to freely pick and choose their ideal board composition across multiple slates, making “voto di lista” somewhat of a blunt tool.

“As a mechanism, it falls short of providing investors with the ability to really fine-tune their votes to pick each individual who they perceive to be suited for the ideal board directors,” said Lauren Gojkovich, founder and managing member of LDG Advisory, in an interview with DMI. “This is especially true now that the U.S. has the universal proxy card, which gives great freedom to investors in voting for their personal preferences.”

One lawyer, who wished to remain anonymous, told DMI that slate voting can also work at odds with board gender quotas. “Where winning slates feature nominees of one gender only, the second slate may find itself forced to appoint nominees of the underrepresented gender, regardless of how they ranked their nominees,” the anonymous source said.





In 2023, 81 minority slates were submitted for election at 52 Italian companies, resulting in the election of 103 minority candidates, according to data from Italian asset manager association Assogestioni.

Historically, most minority slates have been nominated by Assogestioni, but recent years have seen more international investors submit their own slates.

In May 2023, U.S. activist shareholder GreenWood Investors secured four spots on the board of Italian aerospace giant Leonardo SpA, taking aim at the company’s lackluster performance compared to peers. This marked GreenWood’s second ever activist campaign and its first campaign in the Italian market, defeating a rival slate from Assogestioni. GreenWood held a 1.5% stake in the company at the time.

“The Leonardo campaign was a groundbreaking win for the Italian market, with an investor securing four of four board seats, including a seat for the fund’s founder, Steven Wood,” Gojkovich said. “In addition, both Institutional Shareholder Services (ISS) and Glass Lewis recommended for GreenWood’s full slate, which I believe marked the first time Glass Lewis had ever supported a dissident slate against Assogestioni.”

That same month, Assogestioni, armed with an almost 2% position, secured three seats at utility company Enel, while the Italian government secured six seats as a controlling shareholder. A rival six-director slate nominated by U.K. asset manager and minority shareholder Covalis Capital was not successful.

Both Vanguard and State Street supported Assogestioni’s slate, with the former noting in a voting bulletin that these nominees “were best positioned to exercise effective, independent oversight of management and protect the interests of minority shareholders [and] possessed relevant skills and experiences in the industrial sector, capital markets and corporate governance.”

In another campaign to emerge this season, Telecom Italia (TIM) is facing a board challenge from three different investor groups - Merlyn Partners, which is running a 10-person slate of its own; London-based activist Bluebell Capital, which is fighting for five board seats as well as a fourth list of candidates backed by shareholder group ASATI, holder of a 0.5% stake in TIM.

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