Authors: Cristian Ormindean, Bogdan Nastase
In recent years, the global corporate landscape has increasingly recognised the importance of sustainability and transparency. With the introduction of Order 85/2024, companies must adhere to stringent sustainability reporting standards. This legislation marks a significant shift towards integrating environmental, social, and governance (ESG) factors into the core business strategies of companies.
Key Provisions of Order 85/2024
Order 85/2024 updates Order 1802/2014 and outlines several crucial requirements for sustainability reporting, which include:
Detailed Reporting Requirements: Entities are required to include comprehensive information about their impact on sustainability factors, such as environmental and social impacts, in their annual reports.
Scope and Applicability: All Romanian companies, gradually. For medium-sized companies, starting date is 1 January 2025.
Enhanced Transparency: Companies must disclose their business models, policies, and the risks and opportunities related to sustainability. This includes a detailed account of their governance around sustainability issues.
Impact on Corporate Strategies
The introduction of these reporting requirements will likely have several implications for business strategies:
Increased Focus on Sustainability: Companies will need to integrate sustainability deeper into their strategic planning and operations. This may involve shifting towards more sustainable practices, investing in green technologies, or reassessing their supply chain management.
Risk and Impact Management: Entities will need to develop sophisticated methods to identify, assess, manage, and communicate sustainability risks and impacts. This comprehensive approach will not only help in complying with the new regulations but also in safeguarding the company against potential sustainability-related crises while enhancing their overall impact on environmental and social factors.
Stakeholder Engagement: With transparency at the core of the Order, companies will need to enhance their communication with stakeholders about their sustainability practices. This could lead to better stakeholder relationships and increased investor confidence.
Challenges and Opportunities
The implementation of Order 85/2024 presents both challenges and opportunities:
Compliance Costs: Initially, the cost of complying with these detailed reporting requirements could be high, especially for smaller entities. However, these costs may be offset over time by the benefits of improved sustainability practices.
Market Opportunities: Companies that effectively integrate sustainability reporting into their operations might gain competitive advantages. This could manifest as improved market positioning, better investor relations, and enhanced brand loyalty among environmentally conscious consumers.
Innovation Driver: The need to comply with the Order could spur innovation as companies seek new technologies and methodologies to meet reporting requirements and enhance their sustainability performance.
Conclusion
Order 85/2024 is not just a legal requirement—it's a call to action for companies to rethink and reshape their impact on the planet and society. While it poses challenges, it also opens up a range of opportunities for businesses to lead the way in sustainability. As companies prepare to comply with the Order, they will be shaping the future of corporate responsibility in Europe.
By understanding and implementing the principles outlined in Order 85/2024, Romanian companies can not only enhance their sustainability profiles but also contribute to a more sustainable and equitable global economy.
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