Opinion Article for ÓpticaPro Magazine, January 2024
The Challenges of the European Green Deal – From Environmental Taxonomy to Sustainability Reporting Directive
The so-called European Green Deal embodies a veritable legislative tsunami that will strongly impact companies and other entities – indeed, there are many measures aimed at prompting organizations to change the way they conduct their activities, and this is, at the very least, challenging for most of them.
In a sense, "it all started" with the Environmental Taxonomy – perhaps the backbone of the European Green Deal – which establishes a classification of "sustainable activities" and requires all major companies to report the sustainability level of their revenue and investments.
But the legislative piece that is currently putting the most pressure on companies is the so-called "Corporate Sustainability Reporting Directive" (CSRD), which will require over 50,000 companies in Europe (and over a thousand in Portugal) to prepare a sustainability report as transparent and detailed as their financial report. This will be a revolution in terms of financial statements, which will now encompass – with the same level of importance – both the financial and sustainability aspects!
And the story doesn't end here as many other significant legislative measures join these two.
Just to mention a few pieces of a vast and demanding European legislative puzzle on sustainability, which has no precedent in any other continent in the world: the European Climate Law, which establishes demanding carbon footprint reduction targets, which, contrary to those set out in the Paris Agreement, are legally enforceable; the package known as "fit-for-55", which includes a wide range of legislation and sets out the terms in which companies, industries, and sectors will have to contribute to reducing greenhouse gas emissions in Europe by (at least) 55% by 2030; the Due Diligence Directive on Sustainability, which, when adopted, will raise companies' responsibility in social and environmental matters to a whole new level. These are indeed just a few pieces of a puzzle that is constantly being built.
As in everything in life, there are two ways to face this inherently challenging reality: as a threat or as an opportunity.
In this dichotomy, companies that want to take the lead can find various opportunities if they are capable of anticipating. Firstly, opportunities for differentiation. This is because, as sustainability becomes increasingly a competitive factor, the companies that will conquer the future are those that accelerate their ESG (Environmental, Social, and Governance) journey today.
In this journey, it is essential to look at the aforementioned Environmental Taxonomy and understand to what extent the organization's activities can be considered sustainable (by contributing to one of the six environmental objectives defined by the European Union).
But this is just the beginning of the journey.
Margarida Couto
President of GRACE – Responsible Companies on behalf of Vieira de Almeida & Associados
