New demands on companies to adopt sustainable practices
On 4th June 2021 , the EU Taxonomy Climate Delegated Act was passed . This defines criteria for a uniform Europe-wide classification of economic activities that make a significant contribution to climate protection or to adaptation aimed at mitigating the climate crisis . 1 The criteria are intended to mobilise investment for climate protection in the future . Extensions of the EU Taxonomy to other areas affecting society and the environment are already at the planning stage .
In Germany , regulation has also become stricter with the passing of the Supply Chain Due Diligence Act 2021 . Countries such as France , South Africa and India have imposed controls on various aspects of the social activities undertaken by the private sector in the areas of corporate donations and corporate impact investing . In Germany , too , there could soon be a legal framework governing Corporate Citizenship .
Legal action : 2021 has shown that large companies can also be forced by courts to adopt more sustainable practices . One example is the ruling of the District Court in The Hague ordering Royal Dutch Shell to make a 45 % reduction in its greenhouse gas emissions by 2030 . 2 The ruling by the German Federal Constitutional Court on the government ’ s climate protection law in April 2021 also indirectly affects the private sector and sets an important precedent for the future . 3 In September 2021 , for example , a number of environmental groups announced their intention to take Volkswagen , Daimler , BMW and Wintershall Dea to court and force them to adopt further climate protection measures . 4 Greenpeace has carried through with its legal action against Volkswagen in the meantime . 5 It remains to be seen what success ( if any ) these lawsuits will have . But one thing is clear , expectations of what can be achieved through courts are rising , too .
Financial markets : The financial markets are increasingly factoring environmental , social and governance ( ESG ) criteria into investment decisions . In the three-year period from 2016 to 2018 alone , sustainability-oriented assets in Europe and the USA grew by 25 percent to more than $ 26 trillion . 6 By 2025 , these could rise to $ 53 trillion worldwide , accounting for one-third of global assets under management . 7 Statements by top decision-makers from the financial sector such as Larry Fink 8 ( BlackRock ) and Jamie Dimon 9 ( JP Morgan ) confirm this trend . A study by Chief Executives for Corporate Purpose ( CECP ), to which Wider Sense contributed in 2020 , illustrates how this is increasingly reflected in the decisions being made by large companies . 10 Lack of harmonisation , poor data quality and a lack of mandatory standards still hamper the effectiveness of ESG . 11 With the arrival of the EU Taxonomy , however , this will change .