The transition towards a sustainable global system starts from changes within the real economy.
With the growing consciousness about global sustainability issues such as climate change, if businesses hope to attract and retain staff, investors and clients, they need to embrace the “Triple Bottom Line” which is people, planet and profit. Furthermore, corporates must pursue the inclusion and embeddedness of their sustainability strategy into their overall corporate strategy in order for sustainability to become an integral part of the business.
Sustainable innovation is at the core of the transformation and corporates increasingly need to secure an adequate financial backing for their projects. For this reason, businesses need to account for both shareholder value and other non-financial demands from other stakeholders. Indeed, all stakeholders, be it governments, investors or clients, increasingly demand transparency on corporate social responsibility issues.
In accordance with the existing Non-Financial Reporting Directive (Directive 2014/95/EU), large companies are required to disclose certain information on the way they operate and manage social and environmental challenges and to include non-financial statements in their annual reports.
Additionally, further disclosure requirements are defined locally, for example by the 9th Principle of the Luxembourg Stock Exchange, which states that it is mandatory for entities who wish to be quoted in the Luxembourg Stock Exchange to provide their CSR policies to potential clients.
The need to understand and disclose climate change risks also has to be carefully assessed, as national and international policies are being put into place very quickly to accelerate the transition to a low-carbon economy.
Besides the existing disclosure requirements, businesses will also have to adapt to the increasing information demands from financial intermediaries that arise from the implementation of the EU Action Plan on Sustainable Finance, and specifically of the EU Taxonomy.
Among others, it is therefore crucial for corporates to tackle the following strategic and operational issues:
Definition of a corporate sustainability strategy
Adequate non-financial reporting (mandatory vs. voluntary) that will facilitate the due diligence of investors (in line with the requirements of the EU Taxonomy)
Practical challenges for corporates (not exhaustive):
- Strategy
- Disclosures
- Processes
- People & Organisation
- IT & Data
Strategy
- Definition of a corporate sustainability strategy and embed it into the overall corporate strategy
Disclosures
CSR / Non-financial reporting
Disclosure of climate change risks
Processes
- Innovation of existing processes to make them more efficient / sustainable
People & Organisation
- Upskilling of all affected employees (incl. Management)
IT & Data
- ESG-data provision in line with requirements of EU Taxonomy and technical screening criteria
Contact us
Frédéric Vonner
Sustainable Finance & Sustainability Leader, Partner, PwC Luxembourg
Tel: +352 49 48 48 4173
Olivier Carré
Financial Services Market Leader & Sustainability Sponsor, Partner, PwC Luxembourg
Tel: +352 49 48 48 4174