The penultimate day of the 2021 edition of the Malta Sustainability Forum organised by APS Bank presented a module on the importance of sustainable reporting. Sponsored by PricewaterhouseCoopers (PwC), the module examined how businesses – from SMEs to multinational corporations – are rethinking the way they operate, with the drive towards sustainability now placed at the forefront of attracting new investment.
Nathalie Dogniez, a Partner at PwC Luxembourg, was the featured speaker. Ms Dogniez has worked in sustainability for most of her career and she shared her extensive experience in the field of Environmental, Social, and Corporate Governance (ESG) – the three factors used to measure the sustainability and societal impact of an investment in a company or business.
The discussion was moderated by Michel Ganado, Partner at PwC Malta, who started off by highlighting that business purpose in society is changing and, thus, reporting requirements are also changing as investors and stakeholders look at a company’s long-term sustainability rather than just its short-term economic gain.
Ms Dogniez agreed, commenting that current market trends indicate that several institutional investors are moving towards ESG assets. While, in the past, companies were assessed on their financial performance, today they are increasingly judged on a combination of key financial and non-financial performance indicators.
“In terms of disclosure, the Non-Financial Reporting Directive (NFRD) is currently mandating reporting in this area,” explained Ms Dogniez. “However, the Sustainable Finance Action Plan published in 2018 is expected to reshape the financial system.
Its main objectives are Sustainable Investments – to drive investment towards activities that are considered to be sustainable; Sustainability Risks – managing risks stemming from climate change and other environmental factors; and Disclosure – fostering transparency in financial and economic activity,” she continued.
Ms Dogniez added that, globally, the EU is leading the way in terms of ESG and Sustainability Reporting, although other continents are now also taking various forms of action.
Ms Dogniez further explained that, last year, two regulations came into force. The so-called Taxonomy Regulation defines environmentally sustainable activities, while the Sustainable Disclosure Regulation provides stricter requirements on what to report. Given that these regulations can impose additional reporting requirements on companies, Mr Ganado stressed that proportionality needs to be adopted by EU legislators in terms of the implementation of the regulations when dealing with SMEs as opposed to larger corporations.
Mr Ganado raised another common misconception about sustainability: that it isn’t profitable. Ms Dogniez replied that, over time, studies have shown that it is quite the opposite, and sustainability reporting actually helps firms to incentivise value creation. “What is really important,” she emphasised, “is that Sustainability Reporting is not something companies should be doing because it is fashionable or because it’s a good marketing or recruitment tool, but because it is increasingly becoming part of how important aspects of your business will be measured, how you manage sustainability risks, and how you are aligned with market KPIs.”
Mr Ganado brought the discussion to a close stating “are you ready for the ESG change? The time to act is now!” echoing the Forum’s overarching theme: The Time is Now.