Why we need a culture of sustainability in Romania

The year 2021 was an important year for sustainability, which brought several changes in the legislative sphere and not only, changes that will obviously have a major influence in the next period on companies from all over Europe, but also from Romania.

Among the most awaited normative acts is the Corporate Sustainability Reporting Directive amending the Non-Financial Reporting Directive (EU Directive 95/2014), a document that was published as a proposal somewhere in the first part of 2021.

The impact of this directive will be significant as a new standard will be introduced, a common one at the European level, based on which companies will be required to report their sustainability information. It is expected to be quite complex which will determine the allocation of additional resources for companies both time, human and financial. The greatest impact will be felt, in particular, at the level of companies that have not given much importance to the preparation of this report so far. These will be the most affected as the effort they will put in will be greater as there is no prior preparation.

Another impact results from the materiality process, ie the process that a company has to go through to establish the content of the sustainability report, the requirements imposed by the proposal for a directive being much more complex now.

Also, the time available for reporting decreases as this information will be mandatorily included in the annual management report and will be audited. For this reason, the process of preparing annual reports will overlap with that of non-financial reporting, forcing companies to adapt their internal procedures and systems to the new deadlines.

Another legislative amendment that has already entered into force and will apply from next year is EU Regulation No. 852/2020, the Regulation on environmental taxonomy, establishes for the first time a classification of all activities that are sustainable from the environmental point of view and which could thus be eligible for sustainable financing. According to this regulation, companies will be obliged in the  first phase to include in their non-financial reporting the percentage of eligible activities to the taxonomy. And in the second stage, based on an internal analysis, to publish the percentage of activities that are aligned to the taxonomy based on a set of criteria established for each of the 6 environmental objectives included in the regulation. The technical criteria on the basis of which this assessment will be made have been published in the form of a proposal only for the first 2 of the 6 environmental objectives. The impact of this regulation is also significant for the financial and non-financial companies in Romania, which will be obliged, starting with next year, to introduce in the non-financial reports the percentage of eligible activities with this taxonomy. According to a research process started by INNOVA Project Consulting in partnership with The Diplomat Bucharest in October this year, the preliminary results show a very low degree of knowledge of these new obligations among Romanian companies.

In order to achieve the highest possible degree of compliance with sustainability legislation and to have a real chance of achieving the objectives of the European Green Deal, we must first understand the usefulness of sustainability, the value it can bring to companies and society in general. That is why it is necessary for the private and public environment to develop a culture of sustainability, both at the company and country level.

A first step in creating this culture was made this year by publishing the Guide for Responsible Business, an initiative of INNOVA Project Consulting and ARIR –  Association for Investor Relations on the Romanian Stock Exchange. The guide is a peer-to-peer learning mechanism, through which companies can identify practical solutions to the various problems they face, thus improving their sustainability performance both through specific actions and good practices included in the guide. The actions are structured in seven principles aligned with the most important international initiatives in the field of sustainability, such as: the Global Sustainable Development Goals (SDGs), the United Nations Global Compact, the Global Reporting Initiative (GRI), but also the requirements of some of the most relevant ESG (Environment , Social and Governance) rating agencies.

Even if at the moment, the guide includes a series of good practices from the listed companies in Romania, it is addressed to any company, regardless of size.

“The guide is endorsed by the Bucharest Stock Exchange and is currently being analyzed by other authorities and companies. We want to get as much support as possible for this guide, so we encourage other companies that want to join our initiative, to contact us, and to develop together a culture of sustainability in Romania”, declares Mihaela Croitoru, Managing Partner INNOVA Project Consulting.