ESG reporting: the CSRD directive in Italy
The CSRD directive was issued by the European Commission with the aim of increasing the transparency of companies regarding their environmental, social and governance impacts through more stringent reporting requirements for many companies and specific requirements for both sustainability reporting and verification of this information. July 6, 2024 is the CSRD’s target date for transposition by member states. In the Italian legal system on February 16, 2024, the draft of the implementing decree of the CSRD directive, prepared by the Department of the Treasury and the State General Accounting Office, was published and put out for public consultation until March 18, 2024. During the consultation, some trade associations raised a number of concerns regarding the structure of the decree. In this content we will elaborate on the scope of the CSRD directive and the content of the Italian transposition decree. Corporate Social Responsibility Directive: the scope of application The CSRD expands sustainability reporting requirements to all large companies and groups, including listed SMEs (excluding micro-enterprises), and introduces European Reporting Standards (ESRS) developed by EFRAG. It also establishes a requirement for sustainability reporting to be subject to a compliance audit. The main purpose of the CSRD directive is to harmonize the discipline inherent in corporate sustainability reporting requirements. To do this, one of the first steps taken was to expand the scope of those covered by the reporting obligations, namely all large companies, including listed SMEs. In addition, sector-specific standards developed by the EFRAG Advisory Body were introduced precisely to address the need to define rules on sustainability reporting that are the same for all companies involved. According to the CSRD directive, companies obliged to prepare a Sustainability Report (or Sustainability Report) are large companies, both listed and unlisted, that meet at least one of the following criteria: They have more than 250 employees; They own assets of at least 20 million a year; They generate net revenues in excess of 40 million euros. In addition, non-European companies with a minimum turnover of 150 million euros in the EU zone are also required to prepare a mandatory Sustainability Report. Companies will have to have their Sustainability Report audited for compliance by a statutory auditor or audit firm, following a process that initially achieves a limited level of assurance and then evolves to a reasonable level of assurance. This type of audit responds to one of the most important principles of the CSRD: the reasonable assurance, a rule that the same kind of control that is done on the annual financial statements must also be done on the Sustainability Report. In Italy, Consob will be responsible for compliance oversight for listed companies, while there is no further oversight for unlisted companies. From the denial of independent contractors to the penalty system: post-consultation friction points Article 5 of the CSRD stipulates that EU member countries must transpose the new Directive within 18 months, so they have until July 6 to incorporate it into their national laws. In Italy, a draft of the implementing decree, prepared by the Treasury Department and the State General Accounting Office, was published on Feb. 16, 2024, and made available for public consultation until March 18, 2024. One of the most controversial points that emerged from the consultation concerns the decision not to also allow independent attestation service providers to offer assurance services. The European Commission, in the text of Directive 2022/2464, had called for member states to “offer companies access to a broader range of independent providers of sustainability reporting compliance attestation services.” This would have allowed attestation to be obtained not only from statutory auditors but also from independent attestation bodies, with the aim of improving “audit quality” and creating “a more open and diverse audit market.” France, as the first member state to transpose the Directive into its law, immediately adopted the option of extending the option to provide assurance services to both licensed auditors and accredited third-party bodies. Italy, however, chose a different approach. It decided not to extend this option immediately and instead instructed CONSOB and the MEF to conduct a joint study within three years of the decree’s entry into force. This study will need to assess the magnitude of the phenomenon, the ability of the market to handle the increase in the number of entities obligated to sustainability reporting, and the possible burdens and benefits of introducing independent attestation service providers. Confindustria criticized the Italian government’s decision, pointing out the risk of an increase in the time it takes to review documents. Another issue of interest to business associations was the penalty system provided for in the transposition decree. Assirevi, Assonime, Confindustria, Abi, Ania, and the National Council of Certified Public Accountants and Accounting Experts have suggested that this system be revised because it is considered too similar to that provided for financial statements. The decree stipulates that violations shall be punished in accordance with the rules on false corporate communications, which are mainly criminal in nature (Articles 2621-2622 of the Civil Code), and with the administrative fines provided for failure to file with the Commercial Register. For the penalty system, too, the Directive had left Member States free to adopt the system they deemed most appropriate. The main countries of the European Union opted for a less stringent system than the Italian one. For this reason, business associations fear that Italy’s sanctions system may “penalize the competitiveness of the Italian system and incentivize the already worrying phenomenon of relocation of registered offices to European countries with less restrictive supervisory and enforcement systems.”
Employer branding strategy and sustainability in business
Over the past few decades, the concept of corporate sustainability has increasingly gained prominence on the agenda of global businesses. With increasing awareness of the environmental, social and economic impact of their operations, companies have moved toward more responsible and sustainable practices. In this context, employer branding has taken on a crucial role as companies seek to attract and retain top talent by showing a genuine commitment to sustainability. Integrating corporate sustainability into employer branding has become a key strategy for many companies. Organizations that demonstrate a strong commitment to this direction not only attract motivated and ethically oriented talent, but also create a more engaging and rewarding work environment for existing employees. Sustainability storytelling can act as a unifying element in corporate culture, inspiring pride and a sense of belonging among employees and enhancing corporate image in the eyes of customers, investors, and society as a whole. In this content we will explore the concept of employer branding and how it can be integrated with Environmental, Social and Governance strategies. What is meant by employer branding? Employer branding represents a set of characteristics and attributes, sometimes intangible, that delineate a company’s identity as a workplace, highlighting its unique characteristics relative to its competitors. Companies that invest in employer branding strategies distinguish themselves not only by their product or service, but also by their corporate culture, values, and commitment to employees and the community. In a competitive job market, strong employer branding can attract top talent, increase employee engagement, and reduce recruitment and retention costs. Employer branding consists of a number of elements that help define a company’s image and reputation. Some of the main elements include: Corporate culture: corporate culture encapsulates the values, beliefs and practices that guide behavior and decisions within the organization. A positive and inclusive corporate culture can attract and retain talent; Reputation: a company’s reputation as an employer is influenced by employee experiences, online reviews, awards and accolades received, and general perception in the labor market; Benefits and incentives: benefits offered to employees, such as health insurance, retirement plans, professional development programs, work flexibility and growth opportunities, greatly influence the attractiveness of the company; Work environment: the physical and psychological environment in which employees perform their activities has a significant impact on employer branding. A positive, inclusive and safe work environment can improve employee engagement and satisfaction; Internal and external communication: effective communication regarding the company’s values, mission and opportunities both internally and externally is essential to consolidate and promote a strong and reliable brand image. What role does corporate sustainability play in employer branding techniques? Being sustainable is not only morally correct, but also has strategic value. Today’s consumers are looking for brands that are thoughtful, conscious, and sustainable, even if it comes at an additional cost or requires moving away from a brand that is not transparent or environmentally friendly. These are characteristics that also influence candidates in the process of choosing their employer. The challenges posed by the sustainable economy have become a model to be adopted for business benefits, especially for HR (Human Resources) aspects. New generations, which are particularly environmentally sensitive, show different behaviors than previous generations. Companies must demonstrate sincerity in the values they promote, avoiding so-called “brandwashing,” by showing a constant and consistent commitment toward promoting Environmental, Social and Governance criteria within everyday working life. A company’s sustainable reputation can influence both current employees and potential applicants and plays a key role in terms of retention. Demonstrating and promoting consistency in the practical application of the brand’s founding values are the elements that lead to a successful employer branding strategy. Corporate sustainability promoted by Tecno At Tecno we promote the integration of Environmental, Social and Governance factors in every day-to-day operation. For us, this means applying, from a practical point of view, values and principles that are part of Corporate Social Responsibility. Find out what business sustainability tools we have developed with years of experience.
How and why to become a Benefit Society?
Benefit companies represent a new approach to business: social and environmental benefits are added to the achievement of profits, involving stakeholders inside and outside the company. Effective stakeholder engagement contributes to the success of the company, as the company and stakeholders influence each other. What are benefit corporations? Why are more and more companies becoming benefit corporations? Let’s find out together. Benefit societies: what are they?Benefit societies in Italy: regulatory details and statisticsHow to become a benefit societyWhy to become a benefit societyBenefit societies benefits: what are theyThe obligations of the benefit societyBenefit societies: what to indicate in the impact report Do you want to be a competitive and sustainable company? Get in touch with us Benefit societies: what are they? Benefit companies (or benefit corporations) are a legal form of business legally recognized in Italy since 2016, following the law of Dec. 28, 2015 no. 208. Italy was the second country in the world, after the United States, to introduce benefit corporations into its legal system. The purpose of benefit corporations is to produce a positive impact on all stakeholders, society and the environment. Benefit corporations, in fact, have a dual purpose: Profit purpose: arising from the conduct of business activity; Voluntary common benefit: concerning the social aspect, environmental sustainability and transparency. Benefit corporations, in addition to having a for-profit purpose, must pursue one or more purposes that contribute to long-term environmental and social prosperity; they must make transparent what they do, but more importantly, how they do it. Benefit companies in Italy: regulatory details and statistics In Italy, the regulations pertaining to benefit companies are governed by the Stability Law, namely Law no. 208 of 2015. It is the legal framework itself that establishes the focus of the activities of benefit corporations, namely the achievement of social and environmental goals. According to a report compiled by the Italian Observatory on Benefit Societies, data updated as of December 31, 2022, show that there are more than 2,600 benefit societies in Italy, with a recorded increase of 55 percent over 2021 (more than 300 percent more than 2020). The Observatory’s analysis shows that many of these benefit companies are large corporations, with a total number of employees amounting to 140,000. The most represented sectors are: the service sector, with more than 45 percent of companies operating in professional, scientific and technical activities or in the field of information and communication, mainly in business management or management consulting, as well as in software production and computer consulting. The second most represented sector is manufacturing, especially the food and chemical industries. That of benefit corporations represents a way of doing business that will tend to expand more and more over the years, as evidenced by the exponential growth in the number of benefit corporations born since 2020. How to become a benefit corporation All types of corporations under the Civil Code that pursue profit-making purposes can use a benefit corporation model by amending their bylaws to include the following in the corporate purpose: purposes of general common benefit: accountability, sustainability and transparency to stakeholders; specific common benefit purposes: ways in which the benefit corporation undertakes to create the common benefit. Although there is no express regulatory prohibition, there is no logical consistency between the benefit corporation model, which combines the purpose of profit with the purpose of common benefit, and that relating to cooperatives, which are exclusively nonprofit corporations. The obligation to indicate the common benefit the company intends to pursue is crucial for managers and executives so that they do not incur liability actions through their actions. Why become a benefit society Becoming a benefit corporation means achieving a common benefit and generating profits for shareholders. Common benefit is defined as a tangible impact on society and the environment, such as through: The provision of goods or services for low-income citizens or disadvantaged communities; environmental protection; The improvement of human health; The promotion of art, science and knowledge; The increase in capital flows to entities that create a common benefit (impact investments). Company benefit advantages: what are they Amending one’s articles of incorporation in order to become a benefit corporation or forming a new benefit corporation brings several benefits: Ability to attract social impact investment (Impact Investment); greater reputation as an enterprise that operates responsibly; winning young talent, who are increasingly interested in working in socially responsible enterprises; entry into a network of businesses that share the same values and develop new markets; Participation in innovative business that can provide greater value to society and the environment; access tax benefits, such as the benefit corporation tax credit, a 2022 tax break that was provided to support incorporation and transformation expenses and may be provided again. The benefit society may introduce the words Benefit Society or the abbreviation SB next to its corporate name. Presenting oneself in the marketplace as a benefit company attracts the interest of suppliers, customers and investors, who are increasingly focused on sustainable choices. The obligations of the benefit society The benefit corporation must state the purposes of common benefit in the corporate purpose. Each benefit corporation must appoint an impact manager, whose job is to ensure that the corporation pursues its stated purpose of common benefit. The benefit corporation must submit an annual report-impact report or impact assessment-written to a standard that is comprehensive, transparent, credible, and developed by an entity not controlled by or related to the benefit corporation. The most widely used standard is the B Impact Assessment (BIA) issued by B Lab, a nonprofit organization, which acts in accordance with the principles of independence and transparency. The BIA makes it possible to measure the environmental and social impacts generated by the company, using a questionnaire. >The transparency and truthfulness requirements of the transmitted data are verified by the Competition Authority. Benefit societies: what to indicate in the
Preserving cultural heritage: Tecno’s contribution to FAI National Convention
The XXVIII FAI (Fondo Ambiente Italiano) National Convention provided an unparalleled opportunity to take a closer look at the vision and management of cultural heritage. An event that again this year counts on the support of our Group as an official sponsor. The participation of influential guests and the direct experience of the FAI Foundation made this event a meaningful time to reflect on the importance of knowing and preserving the cultural wealth of our country. The theme of the meeting, “Caring for Heritage, Telling the Story,” eloquently reflects the FAI Foundation’s commitment to promoting the appreciation of our artistic, craft and cultural treasures. It is an invitation to recognize the importance of preserving and telling the story they represent. We have chosen to fully support this spirit of preservation and enhancement of cultural heritage because these are issues that along with supporting the artistic, craft and cultural beauty of the area are an integral part of our corporate DNA. From cultural heritage enhancement to corporate social responsibility The concept of Corporate Social Responsibility (CSR) fits perfectly with the mission of the FAI Foundation. It is a concrete and tangible response to the need for businesses to be actively involved in the protection and promotion of our cultural heritage. Events like this demonstrate how the private sector can and should play a significant role in ensuring the continuity and vitality of our artistic riches. Sustainability is not only about production practices, but also about attention to and respect for a cultural heritage that needs to be protected and passed on to future generations; a new way of looking at the future, aimed at assessing the impact of companies no longer exclusively from an economic and environmental perspective, but also from a social one. Tecno Group’s Social Responsibility We are thrilled to have taken part in the XXVIII FAI National Convention, because for us represented another step toward promoting a conscious approach to artistic-cultural heritage management. We have long been engaged in social promotion activities, through sponsorship, financing of exhibitions and restoration works, and also by organizing events for dissemination purposes to instill the value that actions of a socio-cultural nature have on the territory and the people involved. Acting in this way translates for our Group into the concrete possibility of fostering the development of the national artistic heritage, but also of indulging and fulfilling the need to care for and protect our cultural identity. Always mindful of our roots. A social responsibility that we will continue to put into practice.
Energy transition: what is it and why is it useful?
The energy transition represents a fundamental process through which societies are gradually shifting from conventional energy sources, such as coal and oil, to more sustainable and low-carbon sources, such as renewable energy and energy efficiency strategies. This transition is driven primarily by the need to address challenges related to climate change, energy security and public health, as well as the search for new economic opportunities and technological development. In line with targets to reduce greenhouse gas emissions by 55 percent by 2030, the so-called European program Fit for 55, the energy transition involves a wide range of sectors, including energy, transport, industry and buildings, and requires the involvement and coordination of governments, businesses, academic institutions and civil society. In this content we will delve into what the energy transition is all about and what concrete benefits it can bring in building a sustainable business future. The benefits of the energy transition The energy transition offers a number of both environmental and socioeconomic benefits. Some of the main ones are listed below: Reducing greenhouse gas emissions: transitioning to low-carbon energy sources, such as renewable energy, helps reduce greenhouse gas emissions responsible for climate change; Improved air quality: adoption of clean energy reduces air pollution associated with fossil fuel consumption, improving air quality and reducing human health risks; Diversification and energy security: diversification of energy sources reduces dependence on imported fossil fuels, improving energy security and reducing vulnerability to price and supply shocks; Job creation and economic growth: the energy transition promotes the creation of new sectors and industries, such as solar, wind and clean technology energy, generating job opportunities and stimulating economic growth; Energy conservation and efficiency: efforts to improve energy efficiency in buildings, transportation and industry not only reduce energy costs, but also help reduce overall energy demand; Technological innovation: the energy transition stimulates technological innovation, leading to faster and lower cost developments for renewable technologies, energy storage and other advanced energy solutions; Improved resilience: adoption of decentralized and distributed energy sources, such as solar and wind power, can improve energy system resilience, reducing the risk of service disruptions caused by extreme events or natural disasters; Promoting social justice: an equitable and inclusive energy transition takes into account the needs of the most vulnerable communities, ensuring that they have access to clean energy, affordable rates and related economic opportunities. That of energy transition is an ambitious goal, but one that produces its effects on multiple areas, from the more strictly economic to the social, improving the efficiency and environmental impact of business activities. The energy transition market The energy transition market is a segment that is attracting more and more investors, as well as, given the public utility function performed by the use of renewable energy, the interest of national and international institutions. Investments in energy transition projects are growing in number: last year alone the market came to be worth $1.770 billion, a 17 percent increase over the previous year. Highlighting this data is the 2024 Energy Transition Investment Trends report, published by the BloombergNEF platform. Overall, areas such as renewable energy, electric mobility, hydrogen use and carbon capture technologies continue to be the main drivers of investment growth in the energy transition. By 2023, investment in passenger and commercial vehicles and related infrastructure totaled $634 billion, registering a 36 percent increase over 2022. Renewable energy investments increased by 8 percent annually, reaching a total of $623 billion. Growth has been driven mainly by the United States and Europe. The report also showed strong growth in energy sources and sectors such as hydrogen (with investment tripled from the previous year), carbon capture and storage (nearly doubled) and energy storage (up 76 percent). Energy transition consulting: we welcome a sustainable future together Energy transition and energy efficiency represent two areas in which a range of strategies can be undertaken to save current resources, invest in technology projects that take advantage of the existence of new energy sources, and achieve institutionally mandated carbon neutrality goals. Energy transition and energy efficiency are both key to creating a more sustainable and resilient energy system.In Tecno we support, using state-of-the-art solutions, companies and entrepreneurs in developing energy management strategies aimed at avoiding waste and reducing the environmental impact of activities. Let’s build a path to energy efficiency together. Work out your energy management strategy with us.
Green Claim directive: against greenwashing and greenhushing
On March 12, 2024, the European Parliament voted in favor of the Green Claim Directive, with 467 votes in favor and only 65 against, which has already been approved by the European Commission. The Green Claim Directive is the institutional response to the phenomenon of greenwashing and misleading advertising on the topic of sustainability. A directive that was created with the aim of protecting consumers and end users from false claims and generic or misleading labels about the sustainable qualities of products and services, requiring transparency regarding the methodologies used to assess environmental impact, and providing penalties for violations of its requirements. The regulatory framework introduced by the Green Claim Directive not only protects consumers from misleading information, but also promotes fair competition among businesses by encouraging the adoption of sustainable practices at all levels of the supply chain. In this content we will elaborate on the principles on which the Green Claim Directive is based and what types of greenwashing conduct it refers to. What is meant by “Green Claim”? The Green Claim Directive is part of a series of legislative initiatives aimed on the one hand at protecting consumers and empowering them with respect to purchasing habits and, on the other hand, at inducing businesses to communicate information about the sustainable qualities of products and services in a transparent and clear manner. The documents that anticipated the directive include the definition of “Green Claim,” which is: “a message or statement having a non-mandatory character, including text and figurative, graphic or symbolic representations, in any form, including trademarks, brand names, company names or product names, that asserts or induces the belief that a given product or professional has a positive or zero impact on the environment or is less harmful to the environment than other products or professionals or has improved its impact over time.” A September 19, 2023, press release from the European Parliament includes a non-exhaustive list of Green Claims banned by the directive, namely: Generic environmental claims, such as “environmentally friendly,” “zero-emission,” “biodegradable,” without the support of documents and certifications to prove it; Information about emission offsetting mechanisms, which imply the neutral or reduced environmental impact of products without the possibility of providing proof of what is claimed; Uncertified sustainability labels; Claims about the life cycle length of products, which cannot be verified; Information about the unnecessary replacement of consumables. The Green Claim Directive requires companies to certify, through accredited bodies and documentation that follow international standards, everything that is claimed to be sustainable, with the onus being on them to make these types of documents and certificates accessible to consumers and stakeholders. The phenomenon of greenwashing and the difference with greenhushing The Green Claim Directive was conceived as one of the regulatory tools to counter the phenomenon of Greenwashing, which is increasingly prevalent within the communication strategies of large and small companies. This is behavior that is, intentionally or unintentionally, misleading with respect to communicating information about the sustainable and environmentally friendly qualities of products and services, and is likely to produce a double harm: To consumers and stakeholders, because it alters their perception of the brand; To the company that implements it, in terms of corporate reputation and brand reliability. The reason why, over the past decade, the phenomenon of greenwashing has spread exponentially lies in the attempt of many companies to capitalize on the ever-increasing demand for products and services with neutral or reduced environmental impact, in an effort to create a brand image, precisely, “painted” green. Practicing greenwashing involves a number of risks of no small magnitude, for example: Loss of confidence by consumers, who are now increasingly aware about the use of misleading information about the sustainability of products; Absence of improvement of sustainable strategies concretely adopted by the company, especially in the case where greenwashing conduct is not established; In the area of finance, missed opportunities to access investment and financing lines dedicated to companies that adopt sustainable initiatives. Next to the phenomenon of greenwashing, it is possible to place another practice, which represents a kind of boomerang effect of consumers’ growing awareness of misleading information about sustainability: greenhushing. Greenhushing occurs when companies, in order not to integrate greenwashing conduct, even unintentional, choose not to fully provide information about the sustainable commitment they have undertaken. A phenomenon that can originate from a variety of causes, including uncertainty about the effectiveness or certifiability of one’s environmental policies, or the lack of consistency of the sustainable actions taken with respect to the sector to which it belongs, or, again, the choice to gain a competitive advantage over companies in the same sector in an opaque manner. Even in greenhushing it is possible to glimpse a set of conduct that is detrimental to brand reliability, brand reputation, and the social responsibility of the company implementing it, and is by no means an adequate response to the risk of greenwashing. Communicating sustainability with Tecno Corporate sustainability communication emerges as a key pillar in the fight against greenwashing, serving as the main tool for prevention and transparency. This approach not only promotes business credibility, but also facilitates open and honest dialogue with consumers, business partners and all stakeholders. Effective sustainability communication enables companies to educate their stakeholders about environmental challenges and the actions taken to address them. Through clear and informative messages, companies can raise public awareness of environmental issues and stimulate more responsible behavior, promptinginnovation and competitiveness within their industryin sustainable terms. Since these are topics whose management is complex, developing an efficient communication plan about the company’s sustainable policies is a practical and advantageous solution, which also produces considerable effects in the long run, raising awareness of the topic among internal staff on the one hand and the public to whom the information is addressed on the other. Sustainable communication is a lever for corporate social, environmental and governance responsibility. At Tecno we can offer you all the support you need in developing your corporate sustainability communication strategy. Let’s build your
Corporate sustainability: meaning and value
Promoting a sustainable culture within business dynamics means adopting a new way of doing business in a comprehensive way. This is precisely the rationale behind the Environmental, Social and Governance factors: guiding criteria for any company that places sustainability at the center of its choices. It is an innovative, environmentally and socially conscious approach that makes companies competitive in the marketplace and aware about the impact their actions have on the world. In this content we delve into the concept of corporate sustainability, with a focus on the paths that companies take to measure and certify the ESG practices they put in place. The areas of corporate sustainability: not just the environment Corporate sustainability, the underlying principle of Corporate Social Responsibility (CSR) or Corporate Social Responsibility, refers to the practice of companies operating in an economically, socially and environmentally responsible manner. This approach implies that companies take into account the impacts of their activities not only on profits, but also on the environment and society. Key elements of corporate sustainability include: Economic dimension: companies must be economically sustainable in the long term, generating profits in an ethical and responsible manner. This may include practices such as prudent management of financial resources, optimizing the supply chain to reduce costs, and investing in innovative projects; Social dimension: companies must consider the impact of their activities on the people and communities in which they operate. This includes ensuring safe and decent working conditions, respecting fundamental human rights, promoting diversity and inclusion, and contributing to the well-being of local communities through social responsibility programs; Environmental dimension: companies must minimize the impact of their activities on the environment by adopting sustainable practices for natural resource management, pollution reduction, efficient use of energy and raw materials, and climate change mitigation. This may also include research and development of greener products and processes; Ethical governance: good corporate governance is an essential element of corporate sustainability. This involves the adoption of transparent, ethical and responsible management practices that comply with rules and regulations, and take into account the interests of all stakeholders, including shareholders, employees, customers, suppliers and communities. Corporate sustainability from the perspective of investors Corporate sustainability is not only about compliance with environmental regulations, nor is it about formally conforming business practices to the standards of industry discipline; it is a key indicator of a company’s long-term value. The adoption of sustainable business practices represents a not insignificant competitive advantage within the market in which the company operates, as it is a suitable factor for attracting consumers and investors who are increasingly sensitive to ESG issues. From the perspective of investors, in fact, relying on indices such as ESG rating, which measures the Environmental, Social and Governance performance of companies, is a guiding element in investment choices because of the growing awareness about the benefits of these practices for companies in the long run. Indeed, implementing ESG-oriented strategies in companies generates multiple and significant benefits: Risk reduction: companies that integrate sustainability into their business model tend to be less exposed to environmental, social and governance risks; Access to capital: companies that demonstrate a strong commitment to sustainability often enjoy greater access to capital. Investors (as well as banks and financial institutions) are more likely to finance projects and initiatives that promote environmental and social sustainability, as they recognize that such initiatives can generate shared value over the long term; Reputation and brand: sustainability can play a crucial role in building corporate reputation and brand. Companies that adopt sustainable practices can attract loyal customers, attract better talent, and gain the trust of investors, which can have a positive impact on overall corporate value. Corporate Sustainability Certification and ESG Asssessment Through the documentation and certification of companies’ sustainable efforts and the concrete implementation of Environmental, Social and Governance criteria in business operations, a positive, reliable and transparent brand image can be conveyed to the outside world. Among the tools a company can adopt to document the ESG actions it has taken is ESG certification, or corporate sustainability certification: a pathway for analyzing a company’s baseline situation in order to develop and implement a proper sustainable strategy within the organizational and management model. It is a document whose structure is outlined by international agencies that define its objectives, content and guidelines, such as the Global Reporting Initiative. A second tool that is also valuable for the purposes of corporate sustainability certification is theESG Assessment: a tool characterized by a questionnaire that is useful for understanding the starting situation of companies with regard to sustainability, which facilitates the comparison of the existing with the with the aim of making a comparison with respect to ESG policies put into practice by the best in class in the same sector, and allows for the identification of useful interventions for the improvement of the corporate sustainability profile over time. The purpose of both documents does not end with the issuance of certifications and documentation attesting to the company’s sustainable commitment; the rationale behind ESG Assessment and ESG certification is to embark on a lasting journey that lays the strategic foundation for instilling an ESG-oriented culture throughout the company’s life course. Corporate sustainability consulting: together it’s easier Sustainability is a principle that guides and directs business choices and is something that affects all businesses, whatever their sector or size. Together we can define the sustainable approach best suited to your company, understand whether the projects, partnerships and interventions you have initiated are already expressions of a sustainable model, define the next ESG goals to be achieved, and still tell stakeholders and your audience (including social) why and how sustainability characterizes your business model. Rely on us to take advantage of the countless opportunities that the sustainable approach holds for companies today.
Green bonds or green bonds what are they?
Green Bonds, or green bonds, are financial instruments whose main purpose is to promote, through the use of financial resources, sustainability. These are debt securities designed to support initiatives and projects that prioritize Environmental, Social, and Governance factors, such as renewable energy production, rational and responsible use of resources, and energy efficiency. The types of interventions covered by green bonds can vary from sector to sector, such as transportation and logistics, infrastructure, construction, waste management, etc. The first issue of a green bond was in 2007 by the European Investment Bank. In Italy, Green Bonds made their debut in 2014 thanks to Hera, a multi-utility in Emilia, which launched a 10-year, €500 million bond. In this content we delve into the concept of green bonds, with a focus on the sustainable financial investment market. European and national regulations on green bonds To understand what Green Bonds are and the entities that issue them, it is crucial to examine the regulatory framework, especially at the international level. The International Capital Markets Association (ICMA) has pioneered the introduction of “Green Bond Principles,” defining a list of interventions that can be financed. Subsequently, the European Union regulated the sector with its own guidelines through the development of standalone standards for green bonds in the EU. This process was launched in 2018 with the European Action Plan for Financing Sustainable Growth, an integral part of the European Green Deal. A standard involving the creation of a list of authorized certifiers. Only bodies approved by ESMA, the EU’s Financial Markets Authority, can provide a second opinion on funded projects. This mechanism is a reaction of European law to possible greenwashing on Green Bonds, and thus a form of protection from false and misleading information about the sustainable initiatives that are the subject of Green Bonds. In addition to the above-mentioned principle of the so-called second opinion, the European standard includes three other criteria, namely: Alignment of funds raised with European taxonomy regulations; Full transparency in the use of resources from Green Bonds; External evaluation to certify compliance with rules and rates of funded projects. In Italy, Borsa Italiana has launched several initiatives to promote the adoption and dissemination of Green Bonds. By participating in the United Nations Sustainable Stock Exchange Initiative and joining the Climate Bonds Initiative through London Stock Exchange, Borsa Italiana has amply demonstrated its commitment to fostering the transparency of Green Bond issuers regarding their ESG choices, providing investors with specific indices and analyses that could ensure transparency and truthfulness of information. Sustainable finance instruments: the green bond market There has been a significant evolution in the issuance of Green Bonds in recent years, parallel to the increased importance of ESG factors and environmental sustainability issues. A key point of this transformation is the fact that, initially, international financial institutions such as the EIB or the World Bank were the main issuers of Green Bonds. Over time, however, individual companies and business consortia have also begun to use such financial instruments to support their ecological transition, especially in developing countries and emerging economies, in order to achieve the UN’s Sustainable Development Goals contained in the 2030 Agenda. In Italy, companies such as Enel, Cdp, Ferrovie dello Stato and Intesa Sanpaolo are among the most active in issuing Green Bonds. A further sign of this development is the negotiation of the largest corporate Green Bond in Europe, issued by Enel Finance International and guaranteed by Enel Spa, with a total value of 1.25 billion euros and maturity set for September 16, 2024. Since 2007, the Green Bond market has grown a lot, in 2021 surpassing USD 500 billion for the first time, marking a 75% increase over 2020. Europe stood out as the region with the largest green bond issuance in 2020, accounting for 51 percent of the global volume. Green Bonds represent an unprecedented investment opportunity because they provide an incentive for companies to operate according to ESG criteria. In addition, the protection on the veracity of information guaranteed by European legislation on certification bodies make Green Bonds a protected instrument from the risk of greenwashing. Sustainable engagement starts with your business Valuing sustainable business choices focused on Environmental, Social and Governance criteria means looking at a way of doing business that is innovative and oriented toward future trends. Investing in sustainability is not only a guarantee of social responsibility, but is a successful strategic choice for brands that wish to gain a competitive advantage in the marketplace, including the capital market and ESG investments. It is for this reason that every day we choose to support companies interested in adopting a sustainable business model through advice, solutions and communication projects designed to enhance their efforts to improve their ESG profile while contributing to the well-being of people and the Planet. Revolutionize the way you do business with us.
Greenwashing as the main risk to corporate reputation
Corporate sustainability, along with the practices inherent in Corporate Social Responsibility and broader ESG issues, is the subject of numerous debates and represents priority topics within economic, political and social discussions. As the adoption of sustainable practices can offer competitive advantages, it is becoming increasingly crucial to integrate social responsibility and environmental sustainability, demonstrating their application throughout the supply chain. The integration of Environmental, Social, and Governance factors into business operations starts with an essential element: the choice of communication strategy to be adopted. Choosing the wrong, false or misleading ESG communication integrates the conduct of greenwashing: behavior that risks damaging a brand’s corporate reputation, trustworthiness and seriousness in the eyes of investors, suppliers and end consumers. In this article, we delve into why greenwashing falls squarely within business risks. Greenwashing along the entire supply chain. Integrating ESG factors into business operations implies adopting a sustainability-oriented approach that extends to all areas of the business; this translates into practices related not only to one’s own sphere of operations, but inherent to the entire supply chain. As widely held as many business leaders now are about the importance of promoting sustainability, ESG principles and sustainable actions are often not effectively integrated throughout the supply chain, creating a discrepancy between highlighted strategic intentions and actual actions. This problem is most evident in the behavior of subcontracting companies, often located in developing countries, that produce goods on behalf of large multinational corporations. It is precisely along the supply chain that the phenomenon of greenwashing finds one of its most fertile grounds, as evidenced by rather striking past case studies on the subject. An emblematic example is the case of Neste, the leading Finnish oil company producing sustainable biofuels, whose palm oil suppliers, based on data from the study conducted by Friends of the Hearth, cut down 10,000 hectares of forest between 2019 and 2020. Practicing greenwashing is a business risk in its own right The main danger for a greenwashing company lies in the decrease of consumer confidence. Consumers always tend to prefer companies that declare a sustainable commitment concretely supported by concrete actions. A deceived consumer is unlikely to regain trust in the company, and the harm suffered will be greater than the benefit the company would have gained had it not been discovered. False claims of sustainability or environmental commitments are a strong disincentive to purchase a brand. In the financial sector, the European Securities and Markets Authority (ESMA) has pointed out that greenwashing harms investors who wish to invest in sustainable economic activities; disclosure of untrue sustainability profiles could be misleading and unfair, amounting to a misleading practice in selling or pricing. Just as with the supply chain, greenwashing can also relate to different stages of the value chain of an investment, for example, it may relate to the placement stage of a financial product: Because issuers’ statements convey an untrue picture of the ESG factors underlying the product; Because the quality and quantity of data are not certifiable or sufficient to enable proper analysis of companies to invest in from a sustainable point of view. The risks to greenwashing companies and the financial players who support them can be divided primarily into three categories: reputational risk, for damage to corporate image and reputation in the eyes of investors, suppliers and consumers; Legal risk, related to penalties under sustainability policy regulations; financial risk as a result of legal fees, penalties received and loss of market share. Greenwashing poses a real risk to the credibility of the market as a whole and to the confidence of participants, including companies, investors and consumers. At a time when there is a strong interest in sustainability, greenwashing fuels skepticism about any statement on ESG aspects. Preventing greenwashing with an ESG communication strategy Communicating sustainability properly and adopting the right strategy to convey ESG commitment externally are key points for companies that want to prevent risks from greenwashing. Relying on the support of experienced professionals is the key to successful ESG communication. Work out your ESG communication strategy with us, Let’s build a sustainable and future-oriented business paradigm together.
ESRS standards and sustainability reporting: the EFRAG guidelines
The Corporate Sustainability Reporting Directive (CSRD directive), which came into effect this year, governs the non-financial reporting and accountability obligations of large and medium-sized companies. A measure that has piqued the interest of many companies, even those that are not obligated, in corporate sustainability reporting. The enactment of the CSRD directive was supported by the delegated regulations containing the European standards useful for corporate sustainability reporting, viz. the ESRS standards to which all companies covered by the directive must refer; The ESRS standards were published and outlined by the European Commission and the European Financial Reporting Advisory Group (EFRAG) as the Technical Advisory Body, with the aim of creating regulatory harmonization among the various international standards applicable to sustainable reporting tools, such as those drafted by the Global Reporting Initiative. The ESRS standards, consisting of 12 of the main ESG criteria, cover a wide range of topics: the first two standards are generally applicable to all aspects covered by the CSRD, while the remaining cover specific business areas. EFRAG is required, is obliged to update its guidelines periodically, as the Body responsible for the dissemination of standards in sustainable corporate reporting practice. In this article we will delve into the first of the guides provided by EFRAG on ESRS standards. The detail on EFRAG’s Implementation guidance. The new sustainability reporting regulations will be implemented gradually according to the structure and size of the companies involved: public interest companies, which already prepare a non-financial statement, will start implementing the new provisions from 2024 (with the first report in 2025); other large companies will start from 2025 (with the first report in 2026); listed SMEs will start from 2026 (with the first report in 2027, with the possibility of postponing by another two years). To support companies in adopting these new standards, EFRAG has developed Implementation Guidelines, which were put out for consultation in late December and cover: EFRAG Preliminary Guidance 1, on the implementation of dual materiality assessment, containing reporting requirements on materiality assessment, including an illustration of the possible steps in the process to identify information to be reported on the impacts, risks and opportunities (IROs) of its environmental, social and governance activities; EFRAG Preliminary Guidance 2, on Value Chain Implementation, containing reporting requirements related to the value chain, offering guidance on how to identify stakeholders and consider impacts, risks and opportunities on business operations; EFRAG 3 Preliminary Guidelines, containing the full list of requirements contained in each disclosure requirement and their application requirements in Excel format. The EFRAG guidelines on ESRS standards are a form of support for companies affected by the disclosure requirements defined by the CSRD directive, a way through which European institutions intend to promote the concept of transparency in business dynamics. The EFRAG platform for the implementation of ESRS. EFRAG recently made available the first set of technical clarifications to support companies in understanding the European Sustainability Reporting Standards (ESRS) through the EFRAG ESRS Q&A platform . The responses provided within the platform are divided into two main categories: Implementation Guidance, which was subjected to public consultation prior to its finalization; Explanations, which provides clarifications of topics already covered in the ESRS. The published explanations are organized into chapters according to their nature, including cross-cutting, environmental, social, and governance aspects. As of January 31, 2024, out of 258 applications received, 127 have resulted in the publication of an explanation or implementation guide, while the rest are still being evaluated. Most of the questions were about cross-cutting standards, followed by environmental and social sustainability standards. EFRAG announced that further explanations will follow, organized into chapters based on their nature (environmental, social, governance, and cross-cutting), and will be published quarterly to ensure accessibility and clarity. An initiative that demonstrates an ongoing commitment to the development of a clear and understandable framework for all stakeholders. Techno and sustainable reporting: for a transparent and socially responsible enterprise At a time when sustainability takes center stage in the way business is done, EFRAG has taken a significant step toward transparency and harmonization of standards applicable to corporate sustainability reporting by providing the first technical explanations on ESRS. Preparing a Sustainability Report or Sustainability Balance Sheet is not only an obligation defined by European institutions, but a concrete commitment to the application of ESG principles within daily business dynamics. Moreover, the dissemination of these documents is apt to convey reliability and seriousness in the eyes of stakeholders and end consumers. Rely on us to draft your Sustainability Report or Report; let’s build your path to a new business paradigm together.
