Businesses and investors’ understanding of sustainability has changed dramatically since it was first considered as a key element of corporate social responsibility (CSR) in the 1960s. It has grown from a paragraph tucked away in the back of an annual report to an integral element of many companies’ business strategies.
At present, there is no universal consensus on how to report CSR or sustainability metrics to shareholders. Although regional regulations including Directive 2014/95/EU in the European Union exist, complex global supply chains and cross-border activities suggest the need for a global approach.
To illuminate this timely and complex topic, Mazars has worked with the Economist Intelligence Unit to examine the relationship between regulation and sustainability. This article explores measurement, ways to increase adoption of best practice, and regional variations in approach.
Europe – money talks
The European Commission is driving forward with a clear agenda on sustainability, and is already putting measures in place. Further EU legislation should be agreed by 2019 to compel the financial industry to deliver the €180bn needed each year to hit Europe’s climate change targets.
China – sustainability an economic value-add
Rapid economic growth has left China facing some of the most severe environmental issues on the planet. Whilst recognising the investment cost required, China views sustainability as an opportunity for its companies to develop innovative technologies that will allow the country to move up the value-added export chain. What is clear is that it wants a return on its environmental investments. By focusing on research and development, China hopes to lead the world in environmental technology.
However, China still has to contend with the social and economic pressures that have built up as the country has developed. Failing to address these sustainability issues could have serious future cost, reputation and growth consequences for businesses in China.
US – The states and market rebel
President Donald Trump has made it very clear he is no fan of climate change initiatives. But not everyone agrees with him. In June 2018 the US Senate rejected his plans for deep cuts to renewable energy research budgets, while individual states are developing their own projects without the need for federal regulation. Even where state-led initiatives are lagging, market forces are doing the heavy lifting. Consumers are demanding change and business is being forced to respond.
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