Regulation and Sustainability: Moving the Conversation Forward

Regulation and Sustainability: Moving the Conversation Forward

Tue 22 Oct 2019

How sustainability is understood by businesses and investors has changed dramatically since the 1960s. It has grown from being an annual report to shareholders of the actions taken in relation to a company’s social and ethical obligations, to becoming an integral part of many companies’ business strategies.

There isn’t a global agreement on corporate social or sustainability reporting requirements. However, much of the push behind the incorporation of sustainability into business operations is coming from the globalisation of supply chains, and mounting pressures from investors, asset owners, non-government organisations and the general public for companies to report on ESG risks. As a result, there are significant differences in how the US, the EU and Asia are developing frameworks, programmes and legislation to achieve the global shift to sustainability.

Europe – Money Talks

At the regional level, the European Union (EU) has a unified sustainability reporting, enforced through Directive 2014/85/EU. In January 2018, the European Commission (EC) laid out plans to cement sustainability into the European financial system. It suggested introducing a classification system of what is “sustainable” and measures to impose conditions on corporate reporting requirements and the duties asset managers had to investors.

China – Sustainability as an Economic Value-Add

Rapid economic growth has left China facing some of the most severe environmental issues on the planet. 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 must deal with 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.

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