Sustainability Services - ESG Strategy

THE NEW ESG PARAMETERS AND THE PNRR

In an Europe that has focused heavily on the Green Deal, there are great opportunities for organizations that can align themselves with the new ESG parameters. The regulatory framework is now well established.  The new European regulatory system has recently introduced ESG as one of the drivers of economic development.

The main regulatory references are the EU Regulation 2020-852 ("Taxonomy" Regulation) and the EU Regulation 2019-2088 ("SFDR" Regulation - Sustainability Disclosures in the Financial Services Sector). 

In particular, EU Regulation 2020-852 ("Taxonomy" Regulation) has been taken as the reference basis for the National Recovery and Resilience Plan ("PNRR"), prepared by Italy as part of the Next Generation EU to enable economic development based on eco-sustainable investments. In the new context, the private sector is called upon to finance most of the investments necessary for the transition.

The challenge of the next few years for companies will be to be able to measure their environmental, social and governance performance with appropriate indicators based on the new ESG metrics.

It is a matter of equipping themselves with an internal information framework capable of systematically collecting the non-financial data that are increasingly requested by the market, investors and banks.

Corporate Social Responsibility (CSR), which has become a priority in the strategies of major global corporations, aims to reconcile, in a voluntary manner, profit with attention to social and environmental issues, improving the image and reputation of the company in an internal and an external dimension.
The former to improve the perception of its employees and the latter concerning the respect of human rights along the production chain and environmental issues to improve its reputation associated with positive actions. Also, in Italy, companies are particularly committed to the integration of Corporate Social Responsibility in their internal processes.

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THE PATH OF A SUSTAINABLE COMPANY

THE JOURNEY OF A SUSTAINABLE BUSINESS INVOLVES THE LEGAL RECOGNITION OF CORPORATE SUSTAINABILITY ACTIVITIES IN ACCORDANCE WITH RECOGNIZED STANDARDS AND NATIONAL AND INTERNATIONAL NORMS.

Ensuring compliance with laws and regulations and with specific corporate standards is now one of the main objectives of an organization. Compliance, which in the past concerned only a few specific areas, is now also closely linked to the concept of sustainability.

Each company can take the path that best suits its needs and seize the many opportunities to become sustainable. Here are some concrete examples of how a company can start its own sustainable activities by choosing among different alternatives:

• Align with the provisions of the Taxonomy Regulations. In order to ensure the transition in the financial sector, the European Regulations are designed to improve the reliability and comparability of sustainability disclosures and promote the flow of capital and private savings into sustainable activities. Certain types of companies, therefore, must necessarily refer to the provisions of these Regulations and modify their business models accordingly. In the case of Taxonomy, companies are required to submit precise information in order for their activities to be considered environmentally sustainable. Among the obligations is, for example, that of indicating a series of specific KPIs that refer to the environmental objectives referred to in the Taxonomy Regulations.      
• Integrate the Sustainability process with Governance and the Strategic Process. The process of developing sustainability must necessarily be integrated with the identity of the organization and, therefore, with all those aspects that concern both corporate governance (governing bodies, delegation system, 231 Organizational Model and Internal Control System) and operational and strategic objectives (Business Plan).
• Provide for the new function of Chief Sustainability Officer (CFO) within their organizations. Initially, the Chief Sustainability Officer function can be outsourced. This allows you to monitor the sustainable development of your organization while ensuring efficiency and flexibility.
• Stakeholder Engagement according to the AA1000SES standard. This is one of the key processes of the Sustainability Plan. Through the guidelines contained in the AA1000 - Stakeholder Engagement Standard, it is possible to implement a stakeholder engagement process necessary to identify issues that have an impact from an environmental, social and governance point of view.
• Transform into a benefit corporation. Transforming the bylaws to obtain the legal status of a Benefit Company allows you to better adapt to the concept of a Sustainable Company with the resulting advantages both in terms of reputation and from an economic-financial point of view. The transformation into a Benefit is only the initial step from which a new path begins.

HOW TO DESIGN AND IMPLEMENT SUSTAINABILITY PLANS?
Defining a Sustainability Plan means strengthening the social credibility and reliability related to the economic activity, redefining the organizational processes according to a sustainability-oriented perspective and looking for the necessary funding sources to support growth and change.

To learn more about Sustainability Plans, contact the RSM ESG Team

NON-FINANCIAL REPORTING

MANY COMPANIES HAVE ALWAYS PURSUED SUSTAINABLE PROJECTS AND INVESTMENTS, BUT HAVE NOT YET EMBARKED ON REPORTING. OTHERS THAT PUBLISH A SUSTAINABILITY REPORT OR NFD WOULD LIKE TO STRENGTHEN THE CORPORATE SUSTAINABILITY PROCESS

The Corporate Sustainability Reporting Directive (CSRD), the new proposed Directive published in April 2021, which will update the current NFRD that introduced the Non-Financial Statement (DNF), expands the pool of companies required to publish sustainability reports from the current 11,000 to approximately 50,000.

With the CSRD, the European Commission defines for the first time a common reporting framework for sustainability data. The draft directive calls for mandatory publication of sustainability information from 2024 for current DNF obligated entities and from 2025 for large unlisted companies. From 2026, the obligation will also expand to include listed small and medium-sized companies.

Measuring ESG data is therefore the challenge that European companies will face in the coming years.

Issuing Limited Assurance on non-financial reporting or prospectus according to ISAE 3000. Subjecting the non-financial report to a limited assurance procedure in accordance with the International Standard on Assurance Engagements 3000 ("ISAE 3000") assures stakeholders of the truthfulness, completeness and accuracy of the data contained in the report.

Certification of the auditing company on the DNF in accordance with DL 254/2016. The Non-Financial Declaration covers environmental, social, personnel-related issues, respect for human rights and the fight against active and passive corruption and, apart from the drafting obligation that applies to public interest entities that meet certain requirements, can be drafted voluntarily by all organizations. The legislator has provided that a statutory auditor must certify that the information provided in the Declaration complies with the principles and methodologies set out in the Decree.

Support for companies in preparing their first non-financial report. The process leading up to the publication of the first non-financial/sustainability report must be managed in a structured manner so as to define from the outset a reporting methodology that can also be used in subsequent years.

Support for companies that already publish a DNF, in the transition from the GRI "Core" mode to the GRI "Comprehensive" mode. There are two options for producing a report in accordance with the GRI Standards: Core and Comprehensive. The "Core" report contains the minimum information necessary to understand the nature of the organization, its material issues and impacts, and how these are managed. The Comprehensive Report contains additional information about the organization's strategy, ethics, integrity and governance. In addition, the organization will need to communicate its impacts more extensively.

Implementation of the non-financial reporting process at foreign subsidiaries. For a parent company, reporting non-financial information necessarily means monitoring the sustainable performance of its subsidiaries, adapting the reporting methodology to the social, economic and financial context in which the subsidiary is embedded. 

Measurement of non-financial risks and strengthening of the System of Internal Controls in the non-financial reporting process. The reporting of non-financial information is a transversal process that concerns all company functions. In order to create an effective reporting process, it is essential to carry out an assessment of non-financial risks and the functioning of the Internal Control System ("ICS").

General ledger for the traceability in Blockchain environment of Non Financial Information. Innovation in digital financial services provides extremely interesting new perspectives for the Sustainable Finance segment.

Calculation of the Social Return on Investment Assessment ("SROI"). The SROI index is used to measure the impact of an investment or project in terms of social return. The use of this indicator allows the organization to improve its image and level of accountability and to attract new financial resources by being able to demonstrate to its stakeholders the validity of the actions undertaken.

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GREEN BONDS: NEW FINANCIAL INSTRUMENTS FOR COMPANIES

COMPANIES THAT MOVE IN TIME CAN TRANSFORM THEIR INVESTMENTS IN THE "GREEN" FIELD INTO A REAL PROCESS OF VALUE CREATION WITH CONCRETE BENEFITS FOR THEIR BUSINESS

• RSM supports companies in the structuring of Green Bond issues: Green Bonds allow to finance various types of projects with environmental sustainability features, such as water and waste treatment, initiatives related to pollution prevention and control and energy efficiency. Through green issues, companies benefit from resources through which the green economy is outlined.

In partnership with leading engineering companies RSM is able to accompany companies in initiatives to strengthen sustainable management such as adherence to the Global Compact in the "B-Corp" Certification and the implementation of CO2 measurement tools.

• Accompaniment to B Corp certification to meet the standards of social responsibility and environmental sustainability
• Global Compact Accreditation Process. The United Nations Global Compact is the most important global initiative on sustainability issues. RSM is able to accompany companies in the process of approaching the Global Compact and in the preparation of the annual COP (Communication On Progress).
• Implementation of Carbon Footprint measurement tools. An adequate sustainability development plan includes in most cases a process of measuring CO2 emissions. It starts from data and measurement tools to arrive at certifications - ISO 14064, to measure the carbon footprint of the business organization or ISO 14067 to measure the carbon footprint of products - in order to improve environmental performance and green reputation.

The PNRR Task Force of RSM carries out the scouting of facilities and accompaniment in obtaining benefits under the PNRR. The PNRR is the national plan that is part of the Next Generation EU program and is developed around three strategic axes shared at European level::
- digitalization and innovation
- ecological transition
- social inclusion.

For Mission 2 "Green Revolution and Ecological Transition" an allocation of a total of 68.6 billion euro is foreseen with the main objectives of improving the sustainability and resilience of the economic system and ensuring a fair and inclusive environmental transition.

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