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Money makes the world go green!

January 9, 2023

An in-depth look at how the EU Action Plan, the Green Deal, and the financial system in particular are designed to make the economy and our environment greener and more sustainable. And what you get out of it. (Spoilers: jobs, jobs, jobs!).

by Heidrun Kopp

First of all, a conceptual explanation to distinguish between “green” and “sustainable” allocation. In our context, sustainability is the big overarching theme, the so-called ESG pillars: Environment, Social and Governance. When we talk about “green” in this article, this refers only to the one pillar “Environment” (E), while “sustainable” means all three pillars (ESG). At present, both the EU guidelines and the media discussion are predominantly concerned with “green” issues (environmental protection).

Why the EU Action Plan and a “Green Deal” are and were needed

With the EU Action Plan for Financing Sustainable Growth (2018) and in particular with the “EU Taxonomy”point 1 of this Action Plan – the EU Commission has set out to make sustainability measurable and comparable. The aim is to disclose figures, data and facts instead of pseudo declarations of intent in the sense of “We’re doing something good for the world anyway!”.

This taxonomy represents a classification system that defines throughout Europe which economic activity is classified as sustainable. It is about activities in general and not about dividing individual sectors into good and bad. Thus, a company in the petroleum industry can push sustainable economic activity just as much as a company that is operating in the environmental protection sector.

The second important point I would like to pick out from this EU action plan is “transparency“. Here, in the form of “non-financial reporting”, there is to be disclosure of what exactly the company does in the area of sustainability.

In a nutshell: taxonomy, transparency and over 350 billion euros per year

In connection with non-financial reporting, there will be the following changes from 2024:

  • A uniform reporting format for the whole of Europe is applied.
  • The contents must be defined according to the materiality criteria.
  • What is reported (figures, data, facts) must be included in the management report and must be be reviewed by the auditor.
  • The reports must be in a digital format (machine-readable).
  • The reporting obligation applies to companies with 250 or more employees.

This leads to the following consequences:

  • By making non-financial reporting digital and machine-readable, it is not only easier to check the figures, data and facts, but also to compare them across Europe.
    The European Commission does certain analyses every year, where data is requested via the websites of specific target groups in order to fill in corresponding studies. For example, in 2021, there was a study on “greenwashing” which showed that more than half of the websites considered contained elements of “greenwashing”.
  • Starting in 2024, a much larger group of companies will be subject to this non-financial reporting (in several stages). In Austria alone, it is expected to affect 2000 companies. So an increase from 100 to 2000 companies.
  • In order to prepare these reports, companies need not only an awareness of the new challenges on the part of executives, top management, the supervisory board etc., but also on the part of the employees who are operationally responsible for these measures.

Another important aspect is that the more transparent something is, the less likely it is to be greenwashed. It is important not to lose sight of the fact that this transformation of the European economy will require a great deal of investment – estimated at over 350 billion euros per year!

Jobs, jobs, jobs

Additionally, the EU action plan creates (new)jobs, because it takes relevant training to prepare these reports. The fields of ESG and sustainability now require a great deal of technical knowledge – adapted to the respective company orientation. For example, sustainability experts are increasingly needed in purchasing to check which producers and suppliers are being purchased from. This is because within the framework of the Supply Chain Act (which is literally just around the corner), a company must also assume ecological and social responsibility for its suppliers.

In Conclusion: You need explicit sustainability/ESG know-how in every function of a company in some form and different granulation to understand and master the complex interrelationships of sustainability and green finance!

And that is exactly what the continuing education program in Sustainable Finance Management at FHWien der WKW is for.

The modular structure – from the “Executive Program” over 3 weeks to the MBA over 3 semesters – offers a wide range from short and intensive to in-depth master training. Thus, there is a suitable module for every area, for every function and for every hierarchical level for a well-founded and high-quality education and training. Above all, we also have top-class experts who work with us as lecturers.

More about the continuing education program and the author

All information about the part-time continuing education program Sustainable Finance Management and the four different modules at the Vienna Management Academy by FHWien der WKW can be found under this link.

The author of this article, Heidrun Kopp, MBA MA, is Head of Program “Sustainable Finance Management” at FHWien der WKW and prepares interested people in academic continuing education programs to help shape the change towards an ecologically and socially sustainable economy. The expert for sustainability and sustainable finance has many years of experience in the banking sector. She has been working intensively on the topic of sustainability in finance since 2010.

Since July 2020, she has also been covering the most burning issues around sustainability and money in her podcast “Green Money Talks”.

In 2016, Springer Verlag published her book „CSR und Finanzratings. Nachhaltige Finanzwirtschaft – Rating statt Raten!“. In it, she deals with sustainability rating agencies – and was already ahead of her time when the book was published.