Sustainability – A new frontier for fiscal reputation?


There is a new paradigm for the reputation of companies, the integration of ESG (Environmental, Social & Governance) criteria in their activity reports. These criteria began to be designed in 2004, by the United Nations (UN) Global Compact, the World Bank and the Who Cares Wins initiative, made up of 9 internationally renowned financial institutions. Then-UN Secretary-General Kofi Annan led the initiative, which involved more than 50 CEOs of the world’s largest financial institutions. From this first initiative were born the 17 sustainable goals of the United Nations and the model of 24 sustainability criteria of the World Economic Forum (WEF), accepted worldwide as the inspiration for a new way of evaluating the economic development of the planet.

In recent years, due to the climate and social emergency gaining relevance in public and political opinion, sustainability is increasingly important for companies and auditors. In this sense, both the European Commission and the GRI (Global Reporting Initiative), through the ISSB (International Sustainability Standards Board) are focused on creating and harmonizing global sustainability reporting standards.

In our continent, to comply with the 2030 Agenda and the European Green Deal, the European Union has been developing several directives in this area. As an example, specifically for investment in the capital market, the European Union has developed the EU SFDR (Sustainable Finance Disclosure Regulation). This is intended to help investors know whether financial products have environmental and/or social characteristics, classifying funds into three distinct categories, according to their sustainability

Returning to the more transversal ESG criteria, based on the GRI (Global Reporting Initiative) framework, we share some examples that we consider to be good practice to include in company reporting:

• Environmental Criteria: refer to the company’s actions in relation to environmental issues – such as climate change, resource management, waste treatment or greenhouse gas emissions. Some examples: Efficient use of energy and associated CO2 emissions, sustainable supply chain, contributions to Biodiversity, contributions to the circular economy.

• Social Criteria: these criteria refer to the way the organization relates to its employees, suppliers, customers, and the community in which it operates. Some examples: Investment in Human Capital, diversity and equal opportunities committees, integration of refugees, promotion of scholarships for employees’ families, investment in Social Responsibility projects.

• Governance Criteria: directly related to the company’s governance policies, it addresses issues such as policies and values, shareholder rights or transparency. Some examples: Models of shareholder remuneration policy, diversity in the Board of Directors, cyber security, compliance system and investment transparency.

Since its beginning, Auren has understood the sustainability of companies through its impact, not only on the lives of shareholders or investors, but on the entire community involved: employees, suppliers, customers, partners, etc. We believe that, in the short term, companies will mandatorily integrate the ESG criteria in their Tax Activity reports, producing, alongside the Tax and/or Audit report, a Sustainability Report. Our team is here to help your company continue to make this change and thus, not only mitigate reputational risks, but also promote actions that contribute to a future with environmental, social, and economic sustainability for all.

Victor Ladeiro – Partner Auren Portugal