2020 Corporate Social Responsibility Outlook: More sustainability, more laws, more risks
In the new decade, the spotlight will be on sustainability. The already rapid developments in Corporate Social Responsibility (CSR) will gather even more speed. Companies involved in real economy and the financial sector, as well as their business relations are a focus. The legal framework will – in the truest sense of the word – undergo lasting Change.
Companies are therefore well advised to address the topic of sustainability and the resulting risks and opportunities, and to take these into account in their business models. To help you find your way through the “sustainability jungle,” here are the TOP 10 issues that are particularly relevant for companies at the Moment.
- The EU Commission’s European Green Deal aims to transition the EU economy into one of sustainable economic growth, in line with the UN Agenda 2030. In light of recent scientific evidence, the EU aims to become climate-neutral by 2050. This will also entail considerable opportunities for companies. In addition, the EU is intending to strengthen its support of sustainable Investments.
- In its Guidance Notice on Dealing with Sustainability Risks, the German Federal Financial Supervisory Authority (BaFin) provides companies supervised by the authority with some guidance on how to deal with the increasingly important topic of sustainability. In particular, the BaFin expects that entities under their supervision will ensure that sustainability risks are analysed and that this analysis is documented. This is relevant not only for banks and insurance undertakings, but is also directly relevant for all other undertakings that are their customers.
- There will be further discussion on the question of whether and to what extent sustainability should play a role in the monetary policy of the ECB and with Basel III. With respect to the latter it would appear that the EU Commission’s draft directive, announced for the middle of 2020, will actually include a green supporting factor.
- In a recent study entitled “Climate Risks and Response”, McKinsey describes the extensive impact and risks of climate change. McKinsey concludes that companies (too) should occupy themselves with the issue of climate change risks.
- In a recent letter entitled “A Fundamental Reshaping of Finance”, Larry Fink, CEO of Blackrock, predicts that there will soon be a significant redistribution of capital with a view to climate change. Blackrock will make sustainability a focus of its investment approach and will exit investments with significant sustainability risks. In the long term, only those companies which identify and pursue their “purpose” and take into account a broad spectrum of stakeholders will be profitable.
- The motto of the 2020 World Economics Forum Annual Meeting in Davos was “Stakeholders for a Cohesive and Sustainable World”. The transformation from shareholder capitalism to stakeholder capitalism, of which Larry Fink spoke, has significant implications for company corporate governance.
- Under the current law, executive and supervisory boards must appropriately address the opportunities and risks for the company resulting from sustainability aspects (see ARUG II and GCGC 2020). Laws designed to protect the public interests establish a mandatory minimum CSR standard.
- In light of the current results of the Monitoring of the National Action Plan on Business and Human Rights (NAP), a new draft bill for a supply chain law can be expected soon. It will target the (mandatory) implementation by companies of the UN Guiding Principles on Business and Human Rights.
- The German Federal Ministry of Justice and Consumer Protection (BMJV) has published an information booklet on “Access to Justice and the Courts” for human rights violations. This describes when and how victims can bring proceedings before the German courts for human rights abuses. To what extent the existing legal protections are sufficient for victims of human rights abuses is expected to be assessed in the future.
- From 10 March 2021, the Regulation on sustainability-related disclosures in the financial services sector will apply. This will require financial market participants and financial consultants to provide certain sustainability information pre-contractually and publish it on the internet.
This all shows: Sustainability and corporate responsibility urgently belong on the desks in the executive offices. Both aspects can yield new opportunities and risks for your company. In addition, the expectations of customers and suppliers, banks and insurance companies, of the public and legislators are likely to (further) Change.
For further information please contact Dr Daniel Walden.
Dr Daniel Walden