Sustainability, ESG and the role of the Private Sector

Sustainability, ESG and the role of the Private Sector

Globally and in Malta, ESG matters such a climate change, biodiversity loss, environmental
degradation and social injustices continue to take centre stage. As a response to this,
various policymakers and governmental entities are coming together to contribute through
At a global and regional level, the United Nations has set up the Sustainable Development
Goals (SDGs) and the European Union has put in place the Green Deal. In Malta,
governments have devised plans to create a more sustainable economy. Such plans include
the national energy plan and low carbon strategies, amongst others.
However, governments alone cannot bring the sustainability change that is required to make
sure that the world and our islands as we know them are preserved for our future
generations. Businesses, being the lifeblood of the economy, have the resources (monetary,
human and intellectual) and capacity to make much-needed changes. Therefore, the private
sector’s role, which is increasingly coming under scrutiny, is pivotal, both at a global level as
well as in Malta.
Companies are increasing being asked to disclose their ESG indicators, through new
regulations such as the Corporate Reporting Sustainability Directive (CSRD), amending the
Non-Financial Reporting Directive (NFRD), and relates standards, such as the European
Sustainability Reporting Standards.
The general public is becoming more aware of such sustainability issues and has greater
access to information. There is also increased demand for transparency from various
stakeholders, including finance providers and other investors, clients and employees.
External pressures are therefore building on all, including the private sector.
We are firm believers that the private sector should act with resolve and pace on ESG, not
only because of such increased pressures, but also because corporates have the right tools,
resources and capacity to implement change. Such an obligation of companies to do good
for society, therefore, goes well beyond the mandatory regulations.
This is precisely why the Malta ESG Alliance (MESGA) founding members, being 13 large
companies in Malta, have come together to act as catalysts for change. These companies
feel they are responsible to lead by example – by taking actions to do what is right, whilst still
ensuring that they do well. They aim to provide a market signal that sustainable practices do
make business sense, and that companies should not wait for policymakers to be the first
mover on ESG.
By adopting sustainable practices, the private sector can unlock better and more affordable
financing, gain a competitive advantage through the retention of existing an attraction of new
customers and reduce operating costs, amongst others. Moreover, by including ESG risks in
their risk frameworks, companies can be more proactive and ensure their going concern.
Companies who engage in ESG are enhancing their long-term value.
These changes must be deep rooted and genuine. In the run to make our world more
sustainable, there is no place for green washing and sheening. Any claims by the private
sector need to be based off solid facts and statistics.

Going down the sustainability route will require commitment, leadership, and resources.
Green innovation will remain key for transformation. By investing in technologies that are
energy and cost efficient, firms may enjoy greater productivity and asset optimization and
eventually have their returns maximized through long – term investments. Companies will
also have to look at their supply chain, looking to work with businesses who are making use
of sustainable manufacturing, are reporting on their business practices and have been taking
accountability of ESG matters.
Going forward, requests for compliance documentation as well as contract terms and
requirements are expected to become more onerous. Preferential rates in terms of financing
are also being envisaged in the short to medium term. Investors and lenders will begin to
look at the company’s sustainability reporting and actions prior to making investment
Transforming businesses will require dedication, effort and collaboration and that is why
MESGA believes that the private sector is perfectly placed to take the lead. Through
partnerships with fellow private enterprises, as well as the support of government, through
the creation of the necessary legal and financial infrastructure, the private sector can help in
bringing impactful changes and ensure a smooth transition to a greener and more
sustainable economy.

Maria Giulia Pace and Sarah Bulteel are economists at EY’s Sustainability practice. This article is part of a series of articles by MESGA members and their strategic advisors.

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