ESG Criteria and Business Judgment Rule: the Milan Decree

1. The facts

   The matter originates from the so-called Milan model regarding corporate controls. The Court of Milan (most recently with the decree of 29.2.2024) intervened in proceedings under Art. 2409 of the Italian Civil Code, establishing that certain companies had failed to implement suitable general organizational arrangements. The procedural evolution of these interventions involved decrees ordering judicial inspections due to serious managerial irregularities, which subsequently led to orders for the compulsory adjustment of administrative arrangements. On the environmental front, the press has highlighted the climate litigation brought by Greenpeace and ReCommon against ENI, currently pending before the Court of Rome, in which, according to the plaintiffs, it is argued that failing to undertake substantial investments in the ecological transition could endanger long-term business continuity, turning a strategic choice into a potential breach of statutory organizational duties.

2. The rules at play

   The regulatory core is represented by Art. 2086, paragraph 2, of the Italian Civil Code, which imposes on the entrepreneur the duty to establish an organizational, administrative, and accounting structure appropriate to the nature and size of the business. This provision serves as the benchmark for evaluating whether the company is capable of promptly detecting signs of crisis, including, according to some legal scholars, those arising from non-compliance with ESG parameters.

   This is complemented by Art. 2381 of the Italian Civil Code, which articulates the duty to act in an informed manner: directors are required to assess the adequacy of organizational structures on the basis of constant information flows. Finally, Art. 2392 of the Italian Civil Code establishes the liability of directors toward the company for failure to perform such duties with the diligence required by the nature of their office. Breach of these provisions results in the forfeiture of the Business Judgment Rule shield, exposing management bodies to liability actions.

3. What the jurisprudence says

   The established case law, particularly from the Milan courts, has clarified that the Business Judgment Rule (BJR) does not confer absolute immunity. Although the court may not review the economic expediency of a decision (such as whether to invest in product A rather than product B), it must review the propriety of the decision-making process and the actual existence of governance structures.

   The courts have held that setting up adequate general organizational procedures constitutes a mandatory legal obligation rather than a discretionary choice. Consequently, the failure to establish such structures is not protected by the BJR. It is instead legal doctrine that argues environmental risks should be treated as true indicators of corporate crisis: according to this view, a company that ignores the impact of the ecological transition on its business model could be considered lacking adequate organization, with potential liability for directors for losses resulting from impairment of company value or environmental penalties.

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8. What it teaches professionals

   1. Prudential risk mapping: In light of the doctrinal debate, corporate counsel should consider integrating ESG risks into organizational compliance assessments under Art. 2086 of the Italian Civil Code.
   2. Process documentation: Making a green investment is not enough; practitioners must document the informational inquiry leading to that decision to preserve protection under the Business Judgment Rule.
   3. Interdisciplinary collaboration: Legal professionals must work with environmental experts to translate technical data into periodic reports for the board of directors, thereby ensuring compliance with the duty to act on an informed basis.
   4. Litigation prevention: Where activist shareholders are present, implementing transparent structures is essential to prevent petitions under Art. 2409 of the Italian Civil Code based on alleged climate inaction.

9. Update and rectification note (17 September 2026)

   In a previous version of this article, it was incorrectly stated that the Court of Milan had issued decrees under Art. 2409 of the Italian Civil Code specifically related to ecological risks and remediation in the KME Italy case, and that case law had classified ESG risk monitoring as a mandatory legal obligation. Following an editorial review, these statements were found to lack documentary evidence. The text has been corrected to clarify that the decrees of the Court of Milan (most recently the decree of 29.2.2024) concern general organizational deficiencies, that the inclusion of ESG risks in Art. 2086 of the Italian Civil Code is a doctrinal thesis, and that the climate litigation against ENI is currently pending before the Court of Rome.

References: Art. 2086 c.c.Art. 2381 c.c.Art. 2392 c.c.Art. 2409 c.c.Trib. Milano decr. 29.2.2024Trib. Roma

Editorial oversight: Avv. Federico Papa·ICAMUpdated 17 September 2026Content drafted with AI support and subject to editorial source checks. Despite these controls, inaccuracies may remain: reports and rectification requests are welcome. Report a correction