Esteemed Readers,
Nowadays, sustainability has become one of the main elements at the core of the business world, shaping the strategies of companies. Environmental, social and governance (ESG) factors are becoming the keystone of corporate strategies, pushing companies to radical transformation. This transformation is a reflection of progress towards a greener planet, fairer society, and more stable economy.
In this article, I would like to examine the legal regulations and ethical approaches that have come into force in 2020 and onwards, and I would like to address in depth how sustainable business practices create an impact through both legal and ethical perspectives.
Legal Steps Taken and European Climate Law
In recent years, legal regulations regarding sustainability have accelerated considerably in parallel with the increasing emphasis on sustainability. The European Union (EU) has taken a significant step in 2021, in particular with the European Climate Law. The law provides a legal guarantee for Europe to reach the goal of net zero greenhouse gas emissions by 2050 and sets concrete steps to achieve these goals by committing to reduce greenhouse gas emissions by at least 55% until 2030. This legal regulation calls for radical changes in the energy, transportation and agriculture sectors and accelerates the adoption of sustainable policies in these areas.
While legal regulations such as the European Climate Law play a substantial role in reaching sustainability goals, they also raise investor expectations for social responsibility and ethical standards. Alongside legal obligations, businesses are being forced to place greater emphasis on transparency and ethical practices to respond to the growing requirements of consumers and communities. This framework triggers a transformation, further emphasizing corporate ethics and social responsibility.
In this context, supply chain management in particular plays a critical role in the implementation of ethical standards. According to the World Economic Forum's 2023 report, global companies are increasingly gravitating towards the technological solutions to increase transparency and ethical standards in their supply chains. For example, the blockchain technology has the potential to play a major role in increasing consumer confidence by transparently verifying the origin and manufacturing processes of products. Furthermore, AI-powered monitoring systems detect human rights violations and environmental damage in supply chains, allowing companies to respond to such issues more quickly.
Additionally, Internet of Things (IoT) technology can optimize energy and resource usage, saving costs and reducing environmental impact. For example, IoT sensors monitor energy consumption in production facilities in real-time, preventing unnecessary consumption and increasing efficiency.
Sustainable Investments and Legal Responsibilities
The investment world is also experiencing a major transformation in terms of sustainability. The latest updates to International Financial Reporting Standards (IFRS) encourage companies to identify environmental and social risks in their financial reporting. This change strengthens the principles of transparency and accountability, enabling investors to assess the sustainability performance of companies more objectively.
On the other hand, combating climate change is asserting further legal pressure on companies in the international area. According to the 2023 Global Climate Litigation Report, new legal regulations require companies to report their greenhouse gas emissions more stringently and increase their obligations to reduce these emissions. Such legal obligations are pushing companies to take their sustainability strategies more seriously, and violations can result in both heavy financial penalties and serious reputation damage.
Especially the energy sector is undergoing a major transformation in the transition to renewable energy sources. According to the International Energy Agency's (IEA) 2023 Renewable Energy Report, legal regulations to encourage the use of renewable energy are driving energy companies to develop new business models. Investments in resources such as solar and wind power are more appealing due to legal support, and this introduces momentum to investments.
Corporate Sustainability Strategies and Legal Compliance
Sustainability strategies at the corporate level are crucial for companies to comply with the law and manage risk effectively. In 2023, the European Union has taken serious steps to combat climate change. Notably, the EU's Green Deal aims to make European industry more competitive by creating new markets for environmental-friendly technologies and products. Moreover, the EU has taken important steps to support the development of zero-emission industries and accelerate the transition to clean energy with the Net-Zero Industry Act.
On the other hand, EU offers financial support to vulnerable citizens and small-scale enterprises for green transition through Social Climate Fund. The fund promotes investments in areas such as improving energy efficiency, renovating buildings and transitioning to clean heating systems. In addition, the EU's emissions trading system places a price on carbon emissions, encouraging the use of clean fuels and investment in renewable energy projects. The EU's policies and regulations strengthen the sustainability strategies of companies and the legislation provides guidance on how companies should adapt to a sustainable future.
In the upcoming years, EU regulations are also likely to be more stringent and this can result in the need to develop more assertive policies to reduce carbon emissions, increase energy efficiency and expand the use of energy from renewable sources. As QNB, it is essential that we adapt rapidly to these changes and ensure that we are pioneers in the sector by investing in a sustainable future. For this reason, innovation and sustainability shall remain at the core of our future strategy and we shall support the initiatives of all our business units in this direction. With innovative solutions and strategic investments, we shall keep moving forward to become the leading bank of both today and tomorrow.
Ali Yılmaz
Deputy General Manager, Chief Legal Counsel
