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The EU Commission is stepping into 2021 with Sustainability (ESG) at the forefront

January 21, 2021
The EU Commission is stepping into 2021 with Sustainability (ESG) at the forefront

The EU Commission believes that EU based companies are gradually focused on the short-term financial benefits of shareholders rather than their long-term interests and sustainable value creation, a recent study has found.


If this is indeed a fact, it runs a risk of hurting the investment capacity of firms and damage cash flow. For the first time, the debate is sustainability driven and the possible variations to the EU regulatory framework on company law and corporate governance. In other words, findings disprove the hypothesis that companies are ignoring their responsibilities towards sustainability.


The Commission’s commitment to further sustainability is admirable. There is a broad support for many of its initiatives that could assist investors pursue sustainability. However investors are not enemies of sustainability on the contrary, investors are the very people pushing companies to consider all possible risks, including those arising from climate change. The Commission is committed in revising the non-financial reporting requirements, and in instigating taxonomy on sustainability risks.


Nevertheless more is needed at the EU level, such as stronger supervision of the audit process, elimination of double withholding taxes and linking of executive compensation to long-term sustainable goals are just some of these precautions.


There is need for CFO’s and finance managers to prepare themselves and comply with the forthcoming EU Commission Action Plan and sustainable views for the future.


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