Good times for sustainability were already predicted. The first decade of the 21st century ended leaving a promising and encouraging future for sustainability. We are now witnessing the commitment of governments, businesses, investors and society to actively participate in climate action.
Since the launch of the European Green New Deal, every week we contemplate new regulatory proposals on environmental or social matters. A new roadmap has been set out, focused upon decarbonisation.
We are not only facing a new business management rationality, but also a new era of capitalism. We can already see materialized some actions of the Strategic Plan for Sustainable Finances of the EU, new regulations on transparency regarding the environmental obstacles for the asset managers and institutional investors portfolios, exclusions in the investment objectives of the European Investment Bank, the proposal of the European Central Bank for the inclusion of economic impacts related to climate change in stress tests of financial institutions, and an endless number of new proposals that guide the capital flow in Europe, setting the course for economic initiatives and corporate strategic plans.
A new social behaviour against climate change and in favour of the recovery of rights and the reduction of social inequalities. Millions of students from all over the world took to the streets for the right of new generations to a healthy life on this planet, together with the forceful revolts against inequalities in Latin America or Asia, demonstrating the impact of social risks on the economy.
This is the atmosphere in which the new decade has begun, and with it, new challenges come:
Mitigation and adaptation to climate change will be the challenge with the greatest impact in this decade that has just begun, the fight against biodiversity loss will be the second most impactful endeavour.
The recent manifesto on the universal purpose of business in the Fourth Industrial Revolution states that “the purpose of business is to collaborate with all its stakeholders in the creation of shared and sustained value”. It also states that “a company is more than an economic unit that generates wealth. It serves human and social aspirations within the framework of the social system as a whole”.
In terms of corporate responsibility, the aim is to transfer this challenge to the field of sustainability or ESG (environmental, social and governance).
For this reason, issues such as reporting, management or non-financial risks are no longer dealt with isolatedly but in the same recommendations in which financial risk reporting, strategy and management are discussed.
Some proposals for relevant modifications in ESG matters are the following:
- The recommendation on the definition of a communication plan not only for the market but for all stakeholders is reinforced, making use of the media or other channels.
- Regarding diversity, it is recommended that the number of board members of the under-represented gender be at least 40%, although no year is indicated for achieving this, thus correcting the target of having at least 30% women on the board by 2020.
- The need to take action when cases of corruption are identified is emphasized, not only from the management, control and penalty perspective but also from the communication point of view.
- It is recommended that the election of the audit committee members should consider their knowledge of both financial and non-financial risks.
- The audit committee is assigned the function of evaluating the process of preparing financial and non-financial information as well as the systems for managing and controlling financial and non-financial risks (including social, environmental and reputational risks).
- It is recommended that all directors dealing with sustainability are external and at least two of them independent.
It is correct to say that this is the decade of sustainability. However, the new objectives set will require commitment, agility and experience from all the agents involved.