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Preparing for a ‘New Normal’: Translating the EU’s Green Deal into Action

Tom Bardwell, Sustainability Consultant at Schneider Electric Energy & Sustainability Services

Tom has several years’ experience helping organizations meet energy and environmental regulations and targets, manage risks and, ultimately, future-proof their businesses; from both in-house and consultative perspectives.

Tuesday, July 21st 2020 marked a pivotal moment for future economies – following 90 hours of negotiation between the European Union’s 27 Member States, the foundations were laid for Europe’s New Green Deal. As part of the 7-year, €750 billion budget dedicated to kickstarting the post-COVID19 economy, it was revealed during the Commission’s announcement in July that nearly a third will be ringfenced specifically for green investment.

Eye-watering sums of money aside, many companies might wonder whether this is just a quick economic fix, or part of a genuine, longer-term transition towards a more sustainable, equitable economic future? And, if so, what actions can a business practically take to be part of this transition?

Caveated Green Support

The EU’s Green Deal was not thought up overnight. Underpinning the proposal is a wider strategy to create a new economic taxonomy, designed to stimulate environmentally-responsible investment in the public and private sectors. The recently-formed Technical Expert Group on Sustainable Finance (TEGSF) is finalizing the Renewed Sustainable Finance Strategy, of which the Green Deal forms one part. The overall purpose is to bring about a just and green economic transition, providing economic stimulus for both green products which contribute substantially to the overall strategy objectives, and those which do no significant harm.    

Importantly, however, this does not mean the proposed recovery package is purely for cleantech industries. A key aspect of the new strategy is to ensure that the transition is equitable – social governance has become as equally important as environmental, heightened further by the recent Coronavirus pandemic. 

Therefore, industries considered less sustainable should not be precluded from financial support, as long as there is a clear business transition plan to address key sustainability issues in the longer term. Transparency is key.

Wider Perspective

The Renewed Sustainable Finance Strategy ties in with the Non-Financial Reporting Directive, and is likely to result in increased, mandatory climate-risk reporting requirements for qualifying organizations. The €31-billion solvency support instrument has been designed to avoid a return to ‘business as usual’, by offering support to organizations which disclose their current and future environmental, social and governance (ESG) performance and strategy.

Increasingly climate-active investors care more about sustainable business than ever beforeYet, regardless of whether your company operates in the EU or not, the new Green Deal is symptomatic of a more general, investor-lead transition towards a sustainable and socially responsible economy.

Benchmarked performance in environmental and social governance, underpinned by science-based decision making, product life-cycle analysis and quantified climate costs of non-action, are just some of the emerging demands of the new generation of green investors. Black Rock’s recent public lambasting of 53 major companies, due to their inadequate progress in addressing and tackling climate issues, is just one example.

The Next Steps

Although many companies will understandably be prioritizing action against the potential short-term, economic downturn, they shouldn’t ignore the longer-term investor-led shift towards a more sustainable and just economic model. Those failing to act now could even expose themselves to significant business risk (or missed opportunity).

There are many practical steps businesses could take now to avoid being left behind.

  1. Assess your current status – if you haven’t already, start gathering the necessary information and data from your wider stakeholders to identify how you are performing, both environmentally and socially, compared to your competitors.
  2. Be realistic – no investor would anticipate companies to be faultless when it comes to their environmental and social performance. Use areas of poorer performance to steer any proposed improvement strategy and demonstrate genuine commitment to potential investors.
  3. Eliminate doubt– there are numerous non-financial reporting standards out there. Adopting an internationally-recognized standard for sustainability performance reporting, and setting independently-verified targets based on established science, such as Science-Based Targets, will help avoid any doubt being cast over your company’s ESG performance claims and ambitions.

A shift is underway – whether out of compliance obligations or intrinsic motivation, companies across all industries and geographies will feel increasing pressure to actively participate in the low-carbon economy. Schneider Electric helps its clients around the world with services and software to accelerate progress at any point in their sustainability journey. Whether you’ve already begun down the journey toward a sustainable operation or you’re just getting started, we can help your company build a roadmap to achieve your future sustainable goals.

Contact us to learn more about setting science-based targets, carbon mapping, sustainability strategy and more.