Sustainability: A Tool for Staying Competitive

05 of April of 2021

The importance of managing extra-financial indicators in improving a company’s profitability is beyond question. Besides economic valuations, other aspects reveal the company’s capabilities: environmental and social engagement are two examples. This path is not an easy one. Those in charge of sustainability have had to struggle so that the other corporate directorates understand, for instance, that investing in talent or risk prevention augments the organization’s competitive edge.

Over the last year, economic activity took a downturn in many areas, especially during the first months of the pandemic. The initial stay-at-home orders and subsequent health guidelines reduced traffic on highways and other roads. People no longer travel as much as they used to, neither for work nor for leisure. All of this shows how a health crisis can affect an infrastructure business, reinforcing the importance of managing all of these non-financial risks. Today, Ferrovial is facing new mobility patterns and different behavior from people.

The climate emergency declaration, the ongoing pandemic, and regulatory acceleration, such as the approval of Law 11/2018 on Non-Financial Information and Diversity, have underscored the importance of factors besides financial ones that are critical for businesses. Since 2018, companies with an average of more than 250 workers and turnover greater than €20 million must include these aspects in their annual reports.

These pillars were established by the United Nations (UN) back in 2015 when the organization approved the 2030 Agenda. This plan includes 17 Goals to promote Sustainable Development.

Europe is committed to sustainable development alongside this initiative. It has announced its commitment to be carbon neutral by 2050 and its intention to reduce emissions by 50-55% by 2030.

Companies forced to change their criteria

To achieve these objectives, the European Commission has promoted implementing several initiatives.

Along these lines, the EU’s group of experts launched the Sustainable Finance Plan in March 2018. This plan has three main objectives: redirecting capital flows towards sustainable investments, promoting transparency and long-term vision, and incorporating sustainability in risk analysis.

One of the ten measures included in the plan is a technical report that outlines a common method of classifying European companies’ activities as sustainable or not sustainable. This document is called the Taxonomy.

After much work, the Regulation went into effect in June 2020 following the European Parliament’s approval. It requires companies subject to the European Directive on disclosing non-financial information to report their percentage of turnover, investments, and operating costs coming from activities deemed sustainable by the Taxonomy’s classification.

This will get even stricter in December 2021, when compliance becomes mandatory for all European companies.

We’ve worked to stay ahead of the curve by launching a pilot project to determine what percentage of our activity is aligned with the Taxonomy. This information will let us know the requirements for future financial information and assess which areas need more or less focus, thus helping the company in its strategic plan.

After all, 2030 is just around the corner, and emissions will need to be cut by 50-55%. To meet this goal, banks will not finance products or projects that aren’t sustainable. Companies will therefore be forced to change their activities or business models. This way, Europe is making significant efforts to be ‘green’ – but it only accounts for 10% of greenhouse gas emissions. The United States and China, for example, don’t have such high standards.

Europe’s commitment to sustainability goes beyond environmental factors. It will also take on social issues, such as working conditions and quality of education. With the global pandemic, all health-related issues have come to the fore. Still, we must hold on to the bigger picture of other factors that will enable a perfect balance of competitiveness, productivity, and sustainability.

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