Sustainability
ACCOUNTANTS’ CONTRIBUTION IN THE TRANSITION TOWARDS A SUSTAINABLE ECONOMY
Author: Maria Mifsud
This article will indicate the key initiatives being taken at national level and by the European Union (EU) to enable the shift which the financial sector needs to make to start taking environment, social and corporate governance (ESG) factors into consideration in the investment decisions. Specific observations will be made on how accountants can contribute to this transformational change towards a sustainable economy. The EU long-term strategy on climate change, adopted by Member States’ (MS) governments earlier in March, reaffirms the full commitment of the EU and its MSs to the Paris Agreement and its longterm goals. Further to this, the European Commission (COM) published a proposal for a regulation, the Climate Law, to enshrine in a legislation the EU’s political commitment to be climate neutral by 2050. The Climate Law, which is now subject to further consideration under the ordinary legislative procedure by the EU institutions, is one of the key actions planned in the European Green Deal (EGD) presented by the COM in December 2019. European companies can play a significant role in a just transition towards a sustainable economy; however, voluntary action has not brought about the necessary change.
This is limited by the pre-dominant short-term focus of companies. Moreover, possible company sustainability strategies are rarely aligned with science-based targets. Research indicates there seems to be stakeholder support for a policy change ensuring legal certainty and a level playing field with a preference for a mandatory due diligence considering the specificities of different sectors and the size of companies. In most countries, while company law allows businesses to integrate environmental and other sustainability concerns; shareholder primacy is considered by research as the key barrier for sustainability as it is likely to take precedence over long-term sustainability objectives. To this effect, one area of the EGD Roadmap refers to the mainstreaming of sustainability in all policies, with specific attention to finance-related policies. Already in 2018, the COM released an Action Plan
The clear focus of today’s boards should be on the sustainable value creation to all relevant stakeholders, including society as a whole. Sustainable corporate governance can thus help to embed sustainability into a company’s strategy, decision making and reporting processes. for Financing Sustainable Growth and building on this, the COM launched a public consultation on the renewed sustainable finance strategy. Among other objectives, the Strategy aims to provide a roadmap with new actions to increase private investment in sustainable projects and to manage and integrate climate and environmental risks into our financial system. In the past decades, better transparency has been one of the biggest achievements in corporate reporting. In transitioning towards a sustainable economy, it is important to understand >>
