Sustainable business practice

Sustainability and good corporate governance need to become the global standard of business in order for the Paris climate goals and the UN’s Sustainable Development Goals to be achieved. But how can globalised companies with worldwide supply chains take on social and environmental responsibility?

Sustainable business practice and sustainable financial markets go hand in hand. Both have long been an issue in global politics, from the G20 to various UN bodies and the EU. At its core, the idea is that companies should develop business models that use energy and resources sparingly, protect the environment, retain biodiversity, develop technology for adapting to climate change and respect human rights.
The transformation that will be necessary to achieve this is a universal one, as laid out in the global Sustainable Development Goals of the United Nations. For these to be achieved, consumers need to be able to discover sustainable options and business models. Both society and the business world are increasingly urging the policymakers to put in place standards and a regulatory framework for sustainable business.
In the private sector in particular, realisation of the SDGs is just starting out and is reliant on industry solutions. Goal 17 “Partnerships for the goals” is thus especially relevant. The German Council for Sustainable Development (RNE) facilitates dialogue between NGOs, the scientific community, the political arena and the business sector as well as in regional clusters so that solution finding can be a joint process. The Council promotes networking via the RENN, the Regional Hubs for Sustainability Strategies.

The RNE has set itself the goal of promoting sustainability thinking in the business sector. Depending on their impact and the depth of their supply and production chains, companies must shoulder great responsibility here. They also face a variety of special challenges, for instance within the framework of globalisation and the resulting networking of supply relationships between companies worldwide. The Council has thus been concerning itself since 2006 with the concept of corporate social responsibility (CSR), which it defines, in the context of Germany’s well-developed SME sector, as “entrepreneurial responsibility for sustainable development”, and the definition applies regardless of levels of hierarchy or legal form.
Any company that produces, acts and trades with sustainability in mind is dependent on gaining and maintaining the trust of its business partners and customers. The RNE considers credibility to be best achieved through the transparent publication of conflicting goals and hurdles – more so than simply reporting on too flawless perfection. The Council has thus committed itself to fostering corporate reporting that aids understanding and offers comparability. In 2011, in the aftermath of the financial crisis, the RNE developed the Sustainability Code on the basis of intensive dialogue with investors and other stakeholders. The Code serves as the reporting standard for sustainability aspects and lowers the entry threshold to sustainability reporting as well as enabling direct comparison of corporate responsibility performance.
The goal here is not the report in itself, but rather to create competitive drive with respect to sustainable business and foster corresponding management practice and transparency. Performance is primarily to be rewarded via the market. The Code therefore has particular significance for financial analysts and investors: they can use it to more easily incorporate information on environmental, social and governance (ESG) factors into their company analyses. It can be used as a basis for valuation within the scope of portfolio management, for corporate bonds, in lending and for providing investors with information.

The advantage of the Code is its condensed and user-friendly form. It provides companies and organisations of all sizes and legal forms with a framework for preparing reporting on aspects of sustainability and their management. They can report on their contributions to the Paris Agreement and the global Sustainable Development Goals at the general level and, more specifically, on their own supply chain management, as called for in the federal government’s National Action Plan for Business and Human Rights. Companies with a reporting obligation as per the German Commercial Code (HGB) can use the Code to prepare a non-financial declaration in line with their CSR reporting requirement.

The Code constitutes part of a national and international sustainable development policy and can be applied beyond Germany’s borders too. The RNE will happily share its experience of implementing the Sustainability Code. It sees the Code as “shareware” which can be readily adapted to other countries.

Sustainable Business

Detailed information on sustainable business and sustainable finance is also available on the website of the German Council for Sustainable Development. More information

About the Council

The German Council for Sustainable Development (RNE) is an advisory body with a mandate from the German federal government.

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Events by Sustainability Code Office and other upcoming dates can be found here.

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