8 minute read 9 May 2023
Solar panels in green city

Are you in line with the latest global sustainability trends?

EY Slovenia
By EY Slovenia

Multidisciplinary professional services organization

8 minute read 9 May 2023
Related topics Financial accounting advisory services Sustainability
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Be a local sustainability trendsetter, not a follower

In brief
  • More and more investors are taking note of sustainability.
  • Companies often do not take advantege of sustainability opportunities.
  • Asking better questions can set you on the right path forward. 
  • Focusing on long-term value creation and effective communication with different stakeholders can improve your market position.

T 

oday, more than ever, integrating sustainability into your strategy is important to futureproof your business. However, organizations around the world are realizing that to do so, they should plan for and address potential impacts of global megatrends — those drivers that can fundamentally change the way we operate over the coming decades.

CEO Imperative study

80%

of C-suite believe it’s likely companies will take more responsibility for socio-environmental impact in the next five years.

Jumping on the bandwagon too late may result in lost opportunity

Investors are increasingly taking note as great majority agrees that environmental and social factors (not just governance) offer both risks and opportunities, but companies have not considered them in their business.

Understanding and responding to disrupting technological, social and environmental changes is becoming increasingly important for organizations. A narrow focus on financial results is no longer enough to interpret medium- and long-term trends; a more holistic approach is warranted to drive competitiveness and in response to stakeholders, including investors, demands for information on a broader range of topics.

To meet the expectations of investors, companies should look to build strong connections between financial and nonfinancial performance. They should also seek to build a more robust approach to analyzing the risks and opportunities from climate change, and instill discipline into nonfinancial reporting processes and controls to build confidence and trust. Ultimately, companies who ignore the expectations of investors could see their risk profile increase, potentially impacting the ability to access capital.

Integrated sustainability can help businesses understand and adapt to external changes relating to social, demographic and environmental topics. 

Statistics gathered troughout several surveys conducted by EY in the past years surveys (2020 EY‘s Fifth survey of institutional investors (298 decision makers); 2021 EY Long-Term Value and Corporate Governance Survey (102 business leaders); Sixth EY Future Consumer Index) will get you thinking and point you in the right direction.

Business ecosystem stakeholders

Consumer‘s point of view
  • 56% of consumers say will be more likely to buy from companies that ensure what they do has a positive impact on society.
  • 49% of consumers say will prioritize the environment and climate change in how they live and the products they buy.
  • 26% of consumers say, sustainability will be their most important purchase criteria three years from now.
Company‘s point of view
  • 66% of C-suite say “The COVID-19 pandemic has increased expectations from stakeholders that our company will drive societal impact, environmental sustainability and inclusive growth.” 
  • 78% of C-suite say “A focus on sustainable and inclusive growth has been critical to building trust with our stakeholders in today’s uncertain times.”
Investor‘s point of view
  • 98 % of investors surveyed evaluate nonfinancial performance based on corporate disclosures.
  • 91% of investors surveyed say that nonfinancial performance has played a pivotal role in their investment decision-making over the past 12 months
  • 82% of investors surveyed say it would be useful to have independent assurance of the impact of green investments.

In order to identify sustainable development opportunities and achieve sustainability competitiveness in the market, you should ask yourself several better questions which will point you in the desired direction and towards the goals you want to achieve.

Opportunities:

  • How can climate risk provide opportunities?
  • How an integrated sustainbility strategy can help me stand out?
  • How can using green bonds support my company’s long-term growth?

Reporting:

  • How well am I identifying, assessing, managing and disclosing ESG (Environment, Health & Safety) risks?
  • Am I providing investors with the information they want to make informed decisions?
  • Can materiality help reporting meet the needs of investors?
  • Can the EU Directive on nonfinancial reporting give me a competitive advantage? 

 

It's up to YOU to take the innitiative

A sustainable business embraces long-term value and growth in the widest sense. To do this, it usually has a long-term strategy with a broad range of objectives, including both financial and non-financial goals. It also measures its progress against those goals.

Looking at value creation beyond the financial aspect is difficult, but necessary if you are serious about achieving sustainable, long-term value creation for all your stakeholders. Critically, you must be willing to transform aspects of your business and potentially take bold action in areas of your operations that are not currently aligned with your purpose-led strategy – before you get pushed to do so by investors. To instill change, you need to ensure that all stakeholder groups – including customers, employees, investors, partners, and suppliers – understand the reasons why change is necessary, the benefits of doing so and how their actions are aligned to the purpose of the business.

A long-term value orientation has significant implications for how corporates communicate performance. On the one hand this is about being authentic and accountable.

Effective and credible reporting against long-term value metrics is also key to accountability – establishing where there has been progress or lack of progress.

Of course, being authentic and accountable will not happen if organizations are still heavily dependent on conventional reporting frameworks. Focusing on the long term requires that organizations shift from a narrow focus on backward-looking financial reporting to forward-looking insight based on financial and nonfinancial disclosures, including ESG disclosures.

How EY can help

Nonfinancial reporting advisory and assurance

Investors, regulators and — more broadly — society are increasingly demanding greater transparency around nonfinancial performance of organizations to assess their true long-term value. In response, businesses must broaden the scope of their reporting and seek new ways of communicating nonfinancial performance.

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Contact us for more information

Our team of experts can help you take advantage of sustainability opportunities.

Summary

Technological, social and environmental changes have more and more impact on companies. How can you leverage sustainabilty changes to your advantage and mange sustaniability risks?

About this article

EY Slovenia
By EY Slovenia

Multidisciplinary professional services organization

Related topics Financial accounting advisory services Sustainability
Upvote