Lesson 3: Corporate Sustainability & Accountability
Corporate Sustainability explained
Corporate sustainability refers to the concept of a company operating in a way that is socially responsible, environmentally conscious, and economically viable in the long-term. Essentially, it is about balancing economic, environmental, and social considerations to create a sustainable business model that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Another term for this concept is Corporate Social Responsibility (CSR):
Corporate social responsibility (CSR) refers to a company’s voluntary actions and initiatives to address social and environmental issues beyond its legal obligations. It involves integrating social and environmental concerns into business operations and decision-making processes and engaging with stakeholders to understand their needs and concerns. By practicing CSR, companies can enhance their reputation, build trust with stakeholders, and contribute to sustainable development.
Three pillars of corporate sustainability
There are three main pillars of corporate sustainability: economic, environmental, and social.
- Economic sustainability involves ensuring the long-term viability of the business by managing resources efficiently, minimizing waste, and investing in innovation and research to stay competitive.
- Environmental sustainability involves minimizing the impact of a company’s operations on the environment, such as reducing carbon emissions, conserving natural resources, and preventing pollution.
- Social sustainability involves managing the impact of a company’s operations on its employees, customers, and the wider community. This can include ensuring fair labor practices, promoting diversity and inclusion, and giving back to local communities through philanthropy or volunteering.
Corporate Accountability Explained
- The responsibility of a company to be accountable for its actions and decisions
- Refers to the expectation that businesses will act in the best interest of stakeholders
- Stakeholders include shareholders, employees, customers, suppliers, the community, and the environment
- Companies are accountable for their economic, social, and environmental impact
- Accountability is crucial for maintaining trust with stakeholders
- Includes policies, procedures, and reporting mechanisms
- Policies: Define company values and expectations for behavior
- Procedures: Detail how policies are implemented and enforced
- Reporting mechanisms: Provide transparency and accountability to stakeholders
- Builds trust and credibility with stakeholders
- Enhances reputation and brand value
- Improves business performance and financial results
- Helps companies identify and mitigate risks
- Supports sustainable development and social progress
- Corporate accountability refers to the responsibility of a company to act in the best interest of stakeholders.
- Companies are accountable for their economic, social, and environmental impact.
- A corporate accountability framework includes policies, procedures, and reporting mechanisms.
- Accountability benefits include building trust, enhancing reputation, improving performance, mitigating risks, and supporting sustainable development.
Corporate Sustainability Reporting Directive (CSRD)
what is it?
The Corporate Sustainability Reporting Directive (CSRD) is the new EU legislation requiring all large companies to publish regular reports on their environmental and social impact activities.
- helps investors, consumers, policymakers, and other stakeholders evaluate large companies’ non-financial performance
- encourages companies to develop more responsible approaches to business
- radically changes companies’ scope and type of sustainability reporting
- The European Commission defines a common reporting framework for non-financial data for the first time with the CSRD
who will be affected?
Almost 50,000 companies are expected to be impacted by CSRD, making up some three quarters of business in the European Economic Area. CSRD will apply to all:
- Companies listed on regulated markets in the EU (apart from listed micro-enterprises), and large companies. The CSRD classifies a large company as one that meets two out of three of the following criteria: more than 250 employees, a turnover of over €40 million and over €20m total assets. These companies will also have to take into account information at subsidiary level.
- Listed SMEs, although there will be a transitional period when SMEs can opt out until 2028. However, there are big benefits for SMEs to comply with the reporting.
- Non-EU companies with a net turnover of €150 million in the EU, and with at least one subsidiary or branch in the union. (Link)
Corporate Sustainability Reporting Directive (CSRD) – The Timeline (link)
H1 2024 –
Deadline for Member State Transposition (exact date TBC)
2024
2025
2025 –First CSRD Reporting (for FY’s starting in 2024) for companies subject to NFRD
2026 –First CSRD Reporting (for FY’s starting in 2025) for other large EU companies not subjected to NFRD
2026
1st October 2026 –Adoption of limited insurance standards by the Commission
2027 –First opt-in CSRD Reporting (for FY’s starting in 2026) for public interest SME’s
2027
1st October 2028 –Adoption of reasonable insurance standards by the Commission
2028
30th April 2029 –Commission to publish first report on CSRD implementation
2029
2029 –First CSRD Reporting (for FY’s starting in 2028) for non-EU companies with EU branches and first mandatory CSRD reporting (for FY’s starting in 2028) for public-interest SME’s
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