Sustainability is no longer the responsibility of legal, public affairs, and corporate governance departments, but has become a top management priority and a central element of business strategy. One hundred years ago, Henry Ford said that the two most important assets of society – reputation and people – do not appear on the balance sheet of a company. Today, ESG standards come to measure precisely these two intangible assets.
Since 2017, at a European level and later at a national level, ESG-related legislation has been adopted, such as the regulation on taxonomy, or the regulation for financial market players on the disclosure of information on sustainable financing. Moreover, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the NFRD Directive 2014/95/EU. The projected CSRD brings two extremely important elements of novelty: the expansion of companies required to submit a non-financial statement and the audit on ESG criteria.
ESG Framework in Romania
The ESG landscape is rapidly evolving. Fortunately, the Romanian business environment has also begun to consider ESG issues more and more, realizing that they can play a major role in the long-term success of the organization. According to a survey conducted by PwC Romania, only 30% of respondent companies said they have implemented ESG sustainability standards, and two-thirds (63%) said they are not that familiar with them. Asked if the organizations they work for will include standards related to fiscal policies in the ESG strategy, 26% of respondents answered in the affirmative, 5% said no, and 68% said that this is not the case / they do not have or are not aware of the implementation of such of strategies.
Some of the requirements imposed by the European Union have already been implemented at the national level by the recent amendments brought to Order 1802/2014. The non-financial statement must contain, according to this legislative act, details of the current and foreseeable impact on the environment, health and safety, use of renewable and non-renewable energy, greenhouse gas emissions, water use, and air pollution. With regard to social and personnel issues – actions taken to ensure gender equality, implementation of the core conventions of the International Labor Organization, working conditions, respect for workers’ rights to be informed and consulted, health and safety at work, actions taken to ensure the protection and development of the communities. The non-financial statement may also include information on the prevention of human rights abuses, instruments for combating corruption and bribery, the fight against food waste, and the fight against discrimination.
In addition, a national level novelty is the project of the Romanian Sustainability Code, to be adopted in the near future. This is one of the objectives of the project Sustainable Romania – Development of the strategic and institutional framework for the implementation of the National Strategy for Sustainable Development of Romania 2030. The reporting will be conducted through an interactive platform, and all forms of organization, which are not subject to the reporting obligation, will be able to apply the Sustainability Code, voluntarily.
Moreover, the Bucharest Stock Exchange has recently published its first ESG reporting guidelines for listed companies, developed with the technical assistance of the European Bank for Reconstruction and Development.
ESG in the Romanian Real Estate Sector
Construction, urban planning, public contracts, and real estate investments fall under the scope of ESG requirements. More and more investors and public authorities are aware of the sustainability requirements in real estate but, without a clear legislative framework, the implementation of the ultimate goals of ESG is rather unpredictable. Environment-related matters are more clearly determined (e.g., requests in the process of authorizing construction works, for example within the urban planning certificates). Moreover, Romanian public authorities request declarations – prior to an investor being granted a public contract – of the observance of environmental, social, health, and employment norms.
Only multidisciplinary teams will have the ability to depict full real estate and corporate strategies since ESG is broadening its scope to cover all sectors – from energy, finance, and urbanism to tax. Both multinationals and start-ups demonstrate an increased appetite for better-quality non-financial disclosures and a clearer regulatory landscape.
Dan Borbely, Partner, and Raluca Chelaru, Managing Associate, Tuca Zbarcea & Asociatii
This Article was originally published in Issue 9.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.