The new European Commission has launched a New Green Deal to achieve the Paris Climate Agreement and a climate-neutral economy by 2050.
For this to happen, changes of all parts of the economy are required, especially from companies and how they decide on sustainable investments and report on social and environmental risks.
The European Green Deal will focus on the fight against climate change and other environmental objectives in areas such as transport, energy, pollution, agriculture, circular economy and biodiversity.
The European Parliament will have a first debate on it with Commission President Ursula von der Leyen and Executive Vice-President for the European Green Deal, Frans Timmermans, tomorrow in an extraordinary plenary sitting in Brussels.
Ahead of the debate, the role of corporate governance and reporting was discussed last week at a seminar at Press Club Brussels organised by the Association of Chartered Certified Accountants (ACCA) and other regulatory and accounting bodies.
Heidi Hautala, MEP and Vice President of the European Parliament, said in her keynote address that sustainability is an absolute necessity for everyone. She wanted to send a message to the new Commission to implement reporting requirements and even go further:
“The European Parliament has declared the climate emergency. This emergency means that it is necessary to roll up our sleeves and get to work – we need to transform our economies from resource-consuming into resource-efficient.”
“This means that we must re-think the value creation – how it can be done in a socially and environmentally-sustainable way. It is not enough what legislators or companies have done so far – we must be more ambitious.”
According to the panellists, full disclosure of investments decisions and their environmental consequences is still low and comparability is lacking. Although some progress has been made in recent years, opinions are divided on their impact and the transition.
Companies are inclined to report only on decisions that have a material impact on their balance sheets and may accept degradation of the environment. “We don’t look at the external costs we don’t know,”remarked one panellist.
Jimmy Greer, head of sustainability at ACCA, said that its recent study demonstrates that there are many concrete ways for finance teams to engage with a more multi-dimensional approach to value creation.
He referred also to the Non-Financial Reporting Directive. The directive requires large companies to disclose certain information on the way they operate and manage social and environmental challenges. The intention is to help investors and other stakeholders to evaluate the non-financial performance of large companies.
Asked by The Brussels Times about the directive, Greer replied that the Commission has recently confirmed that it will review the corporate disclosure rules to integrate greater focus on sustainability. The new proposals may touch on issues such as the scope of the directive and potential stronger requirements for assurance of the sustainability information.
The European Parliament agreed last week on a “green” list of recognised sustainable investments. The agreement also includes additional transparency – investors will be able to see what percentage of their financial product is really sustainable – and includes an obligation to declare non-sustainable products as well.
Jimmy Greer explained that ssustainability disclosure, corporate governance and the “green list” (taxonomy) fall under the same framework, the 2018 Action Plan on Sustainable Finance. “All these initiatives aim to advance sustainable finance at the pace and scale required to align with the Paris Agreement.”
The Brussels Times