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EY Romania study shows Sustainability will play an important role in the recovery of companies

The role that sustainability has in the development strategy of companies is starting to become better defined at the management level, whether it is about managing the general impact that the company's activity has, or about creating long-term value for stakeholders. According to the study conducted by EY Romania "Sustainability and responsible investments in the context of COVID-19", 80% of respondents say that the integration of sustainability in the decision-making process has a long-term impact on operational performance.

Regarding responsible investments, based on criteria related to environmental, social or corporate governance factors (ESG factors: environmental, social and governance), business representatives do not predict a substantial change for the Romanian market: almost half (49% ) of respondents expect a minor increase in sustainable investment, and 18% say they cannot estimate what will happen after the COVID-19 epidemic with this type of investment.

“ESG factors and long-term value can be considered two sides of the same coin, they are interdependent" says Laura Ciobanu, Manager, Climate Change and Sustainability, EY Romania. "The world is changing, and these changes can quickly affect the business environment, as we have seen recently. It is important for companies to understand that the inclusion of the principles of sustainability in decision-making processes can help to create a competitive advantage, while responding to pressure from stakeholders to adopt social responsibility practices. Accepting this trend will involve a series of changes in the organizational culture, in the existing processes and technologies, but, in the long run, these efforts can lead to the creation of new opportunities, to the improvement of performances, but also of the company's reputation" added Laura Ciobanu.

With the introduction of legislation on environmental protection, the safety and security of employees and communities, as well as the obligation of non-financial reporting, the concept of sustainability has become increasingly popular in Romania, in line with the global dialogue on sustainable development.

In Romania, the reporting of non-financial aspects is regulated by Order no. 1802/2014, which includes the amendments brought by the MFP Order no. 1938/2016 and MFP Order no. 3456/2018, and provides for the obligation of companies with over 500 employees to report information on at least environmental, social and personnel issues, respect for human rights, the fight against corruption and bribery.

According to the EY survey, almost 74% of respondents say that integrating the principles of sustainability into business strategy and operations management is a priority for the companies they represent.

More than 43% of responding companies with less than 500 employees already report non-financial issues. In the category of enterprises with more than 500 employees, 85% of the responding companies publish a sustainability report / non-financial statement, given that they meet the mandatory criterion.

About 80% of respondents believe that environmental, social or corporate governance factors are taken into account when their companies make decisions regarding operational management and investment strategy. 10% state that ESG factors are not an important element on the strategic agenda of the companies they come from.

In the context of the new pandemic, the most important ESG factor considered by respondents is "health and safety at work", being a priority for almost three quarters of decision-making professionals in companies.

The following places of importance are "decision-making transparency" (40%), "energy efficiency" (29%) and "the overall impact of companies' activity on the environment" (27%).

The last places are "environmental and social assessment of suppliers", "freedom of association of employees" and "protection of biodiversity".

How will the pandemic influence the sustainability strategy of Romanian companies?

More than half of respondents (52%) say that the COVID-19 epidemic has led to a rethinking of the business strategy for the companies they represent, with sustainability playing a role in redefining long-term priorities.

For 20% of respondents, the new epidemic did not cause a change in business strategy, and for 28% the COVID-19 crisis led them to make strategic changes in their companies, but sustainability did not play a role in this process.

Community involvement projects are one of the ways in which companies can integrate sustainability into their work, thus having a positive impact on the social level and generating long-term value. The volume of community involvement activities of private companies is, however, largely determined by the annual budget allocated to CSR projects, which is directly influenced, in turn, by the annual profit of each company.

Sustainable investments also play a role in the sustainable development strategy of companies and may vary in volume depending on the field of activity. In this regard, the COVID-19 epidemic has led to an increase in sustainability budgets, especially for companies that direct more than 10% of the annual budget into community involvement activities and responsible investment.

For companies that allocated between 0% and 10%, stagnation or reductions in sustainability budgets can be observed, illustrating the vulnerability of companies with smaller annual budgets.

The most popular responsible investments among respondents are those aimed at energy efficiency, technologies that reduce environmental impact and responsible procurement. Over 60% of the decision-making professionals surveyed support the allocation of funds at the level of their companies for these types of investments.

The reduction of the carbon footprint, as well as the development of products and services for social inclusion and disadvantaged groups occupy secondary places, being considered less attractive by respondents and the companies they represent.

It is still uncertain to what extent sustainability will play a central role in the post-pandemic economic recovery and what principles of sustainability Romanian companies will take into account for future investments. But at the operational level, sustainability seems to be becoming an increasingly important element. The COVID-19 epidemic can represent an important moment for Romanian companies, in which they can understand the atypical challenges of the present and can fold strategically in order to develop sustainably, creating value for all stakeholders.

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