Proceedings of the webinar Workshop, the EU proposal for a “Corporate Sustainability Reporting Directive (CSRD)”

Fabrizio ZUCCA: The most relevant part of the webinar, of today’s conference, is on the new directive that will somehow have to come into force in the next 1 or 2 years. As far as we’re concerned, what I wanted to start by saying, from the point of view of sustainability, is that in recent years there’s been a lot of talk about it, especially in terms of the new PNRR. There is a lot of talk about it, but it almost seems as if sustainability is somehow linked or the same as the energy transition. In other words, when people hear or read about sustainability in the media, they think that sustainability is something that can be achieved by switching from fossil energy production to renewable energy production. This is obviously a major simplification. However, when we talk about sustainability, we should look at sustainability in a broader sense, at 360 degrees. For example, one of the interesting aspects that need to be assessed and that is much less talked about is the access to resources. I won’t spend too much time here on the first slide, and I’ll leave the floor to the other speakers, but on this slide, you see a table of elements. What is special about this table of elements: you can see, basically, in different colours, those elements that could become critical in the next 100 years, i.e. in the near future, elements that could no longer be available for the production of goods that are then sold. Here, in particular, you can also see which components of the periodic table serve to highlight the differences between the elements and their relative availability: clearly, the colour green indicates a particularly high abundance, then it gradually moves towards yellow, orange and red, which instead indicate elements that are restricted or will be restricted or unavailable in the future; and then you also see a darker grey/black colour, which is linked to the components that are imported from so-called “conflict” countries, i.e. countries where this extraction is used to finance wars, basically. Now, why is this talk of resources interesting? Perhaps you have heard of this fatal day that currently falls around June or July when we consume all the resources that the planet is able to replenish in that year. In practice, this means that in July all the available resources that the planet has produced in that year have been consumed, and those that we are going to consume from July onwards are resources that are at best taken away from future generations because there is an inter-temporal issue: what we consume today can no longer be consumed by those who come after us. But that is only one of the problems. The other problem is that this type of resource consumption is the preserve of a small, unfortunately or fortunately growing, number of people in the global population. As our business model becomes more widespread, i.e. a model that pushes consumption to increase the value of production, the consumption of resources clearly becomes more and more massive as more people have access to a certain type of welfare. Up until 30 years ago, we Europeans and Americans were the only ones who consumed, but today there are millions of Chinese and millions of Indians, and clearly the more these people, the more these countries raise their level of well-being and the more resources are consumed, the more this adds the problem of inter-temporal consumption – so what we consume today will no longer be consumed by our children, our grandchildren, but it also clearly creates pressure on the cost of raw materials because there is more demand for raw materials and therefore a struggle to get hold of them, and this generates a greater difference or imbalance within countries that already have a certain level of wealth, because by increasing costs it obviously makes it less and less possible for the middle class, and certainly the lower class, to access these resources. On the other hand, it also creates a problem of conflict between countries that are, let’s say, rich, and countries that are gradually emerging and becoming rich. So, the point is: you have to go and explain to the Chinese why they don’t have the right to buy 300 pairs of shoes when their counterparts in Germany, France, and the United States have the right to buy 300 pairs of shoes. The problem is that in such a model, the result, or rather the two results, are: on the one hand an increasing consumption of resources and on the other an increase in conflict. So, I say this because, in my opinion, it is important that the issue is somehow addressed as a whole. So, what can be done? What is being done? What is one of the possible solutions? One of the possible solutions, obviously based on who is speaking, is to move to another economic model, and this is what I need now to introduce the important issue that we are going to deal with today, namely the new regulatory frameworks.  What you see on this slide is the economic model developed by the MacArthur Foundation, which is one of the main players in the sector and one of the foundations, one of the think tanks, that was the first to start working on a change of model, a change of paradigm within the global economy. When we talk about the circular economy, we often think about something that is linked to waste recycling, and therefore the fact that in some way the overall recycling is given by the extraction of resources, transformation, consumption, and generation of waste that can then in some way be returned to the initial production cycle, partly saving the extraction of new resources.  This is actually a very small part of this model, and it is what you see in the outermost cycle where you see the word recycle. In reality, when we talk about the circular economy, we are talking about a process through which we try to extend the life cycle of products, to replace the consumption of physical products with, let’s say, virtual products, and therefore with services, and this is a very interesting aspect. On the one hand, the scheme re-proposes biological cycles – which, however, we will not deal with this day, as we will stop at industrial cycles – and basically re-proposes three minor cycles: the cycle linked to maintenance, reuse, redistribution and re-manufacturing, i.e. product renewal, which are, in fact, typical cycles of the industrial sector. Therefore, and I would like to refer to this point in order to introduce the next speakers and today’s work, the fact that sustainability requires a radical change in the production method obviously involves what the production system, i.e. companies, can and in some way must do to ensure that this cycle, this system, can be implemented. Therefore, to go back to today’s topic, it is clear that in order to be able to set up a model that looks at sustainability from a production point of view, from a social point of view, from an environmental and consumption point of view, some important things may be necessary: the first thing is that the company, the entrepreneur, first of all realise the impact that their activity has on the whole system, therefore on the system as a whole, in terms of environmental use, but also in terms of its impact at a social level and so on. So, an awareness that the impact goes beyond the ability to produce a product or to generate a profit. Then, what the entrepreneur must start understanding and assessing is “I understand that I have an impact and now I also want to measure this impact” because without measuring the impact that the company has on what we call stakeholders, in any case stakeholders in the broadest sense, it becomes complicated to build a scheme and a model that allows you to define a strategy and an improvement. Then, obviously, the other fundamental aspect: after I have realised and measured it, the other fundamental thing is to be able to communicate it, and therefore to be able to tell my stakeholders and the public what I am doing to be able to implement a model that is more sustainable. As I said, more sustainable as a whole at a general level. So, my introduction is fundamentally linked to this: the entrepreneurial system, the industrial system, is an integral part of a possible change that could bring the whole system towards a logic of sustainability. It is for this reason that the European Union began a process of analysis, study, and regulation of this phenomenon many years ago. Bear in mind that even the PNRR is strongly linked to this type of approach: most of the funds will be spent on projects that in some way have this type of approach, hence this type of perspective. Lastly, there are all these new regulatory elements that we are going to analyse today, and some of them are already in place – we will see that this process basically began in 2018 – and some, instead, that are, in some way, about to be introduced. So, at this point, I would say that my introduction is over and I would then leave the floor to Mr. Bicciato, who is the Secretary General of the Sustainable Finance Forum and is connected with us.

Francesco BICCIATO: Thank you, Professor Zucca. Thank you for the invitation. Good morning everyone, my name is Francesco Bicciato and I am the Secretary General of the Forum for Sustainable Finance, which is a multi-stakeholder organisation that was set up twenty years ago when there was very little talk of sustainability and sustainable finance, and so we have moved from an area that was obviously a niche area to an area that has now become mainstream, and therefore in some ways at the centre of both public and private agendas. In the meantime, I would like to refer for a moment to what Professor Zucca said earlier about clarifying the issue of sustainability. In fact, the issue of sustainability is not a new one. I would say it has its roots at least as far back as the Brundtland Report. However, without going into the history of how the concept of sustainability has evolved, what is important to understand is that sustainability is a tripartite concept: economic-financial, social, and environmental. So at least from our point of view, it must be considered, using a metaphor, as a sort of three-legged stool where if you cut one of the three legs the stool falls to the ground. So basically, all three elements are fundamental elements to have full sustainability. If we apply the concept of sustainability to the financial side, i.e. to finance, and here I would like to recall very quickly the definition that is normally used and that is also incorporated in the rules and regulations that we will talk about later, there are two important elements. So sustainable investment creates value for the investor, for society as a whole and unfolds its best effects in the medium and long term; the other important element, which is linked to the real economy, is the concept of integration which basically integrates financial analysis with environmental and social analysis of good governance. The so-called ESG factors are now known a bit to everyone. What is the important concept here? It is precisely this integration, i.e. the social report, the sustainability report, as we knew it until a few years ago, are not complementary elements to the economic-financial analysis, but are an integral part of the financial analysis, and this is the general approach that drives the strategies of sustainable investors. If we look at the process that has led us to regulate sustainable finance and sustainability in general, as Professor Zucca also mentioned earlier, we can see that the process has been going on for quite a long time. In 2008, the first Transparency Code was launched; a key date was 2015, hence Agenda 2030, the Paris COP21 agreement, and for the first time the issue of climate change was recognised as an emergency that could have a very serious economic and financial impact. Above all, at the regulatory level, a law in France, the loi de transition énergétique, somehow pushes towards the concept that environmental protection is in fact a fundamental factor for economic development. That year also marked the establishment of the Task Force on Climate-related Financial Disclosure (TCFD) at global level, but the most important moment was 2016, when the European Commission set up for the first time – bearing in mind that until then the EU policies related to financial aspects did not mention sustainability-related concepts – this group of experts began to think about sustainable finance. This group of experts then produced a report and based on this report the first Action Plan on sustainable finance was launched in 2018. It is a very ambitious Action Plan that basically focuses on two aspects: one is transparency, so in a way, it tries to bring the financial sector out of the lack of transparency that had characterised it in previous years, and the other element is to deal with both the retailing and the institutional finance sectors, even if it is actually a very, very specific Action Plan that focuses on savers and the relationship between investors and savers. One of the interesting elements of this plan is that, although in theory, it is a plan that must apply the ESG approach, in fact 2018 shows that the first action plan is very focused on environmental aspects. So, let’s say that the social aspects and good governance, which are the other two factors that make up the ESG approach, are neglected at this stage. In actual fact, we will see that this is a problem that we will drag on, and the speakers who will come after me will probably also talk about it.  So basically, the plan is very much focused on environmental aspects.  A Technical Group has been set up, and there is another regulatory element: in 2019, i.e. before the pandemic, the New Green Deal is launched. This is very important because all the principles, and moreover the funds allocated to European environmental policies, with the New Green Deal of 2019, are in essence also included as general principles in the Next Generation EU, which is launched during the pandemic.  What I want to say is that there is a continuum between 2018, 2019, 2020 on some fundamental principles: basically, the environment, on the one hand, digitalisation, on the other hand, the resilience plan, on the other hand, which in some way constitute a continuum that until that moment was not ready, was not specific to European policies on sustainability.  This is the road map.  Today we are faced with a process of renewal and reform of the strategy on sustainable finance, and from here on a whole series of regulatory acts have been launched, which I will list here very, very quickly:  SFDRs, so I mean the regulation on the disclosure of financial investments, obviously the taxonomy that the regulation 852/2020 which is a bit the root for all other regulatory measures, the Non-Financial Disclosure Directive (NFRD), which you may know even better because it has its roots in 2014, the regulation on Climate Benchmarks and then we have a whole series of regulatory acts that have not been translated into regulation or directive at the moment, but which are fundamental for the functioning of the sustainable finance system. On the one hand there is the ecolabel, which you have to bear in mind that there is no label on sustainable finance at the moment, so the subject is very complex, there is no third-party agent at the moment defining what is sustainable and what is not in finance. The taxonomy does not have that objective. The taxonomy has the objective of classifying those sectors that can be considered sustainable. So, the element of the label is a very important element, for example in France, much less so in Italy. However, it will be a fundamental theme and we will see whether it will be translated into a directive or regulation or whether it will remain, as it is now, the subject of a study group made up of experts from the European Union. Then we have the EU Green Bond Standard (GBS), which is a much more important issue in the sense that although it is not the subject of a regulation or directive, the standards, the European Bond Standard, are now recognised and are based on the Green Bond Principles, which were established three to four years ago, and in some ways have given a great impetus to the issue of Green Bonds: on the one hand, an impetus for the issue of Green Bonds and then Sustainability Bonds in the SRI market – Sustainable Responsible Investment – I use these acronyms because in reality, they are those found in official documents. On the one hand, the private market launched green bonds or Sustainability Bonds many years ago, and on the other hand, these standards are also used to some extent for the Green Bond sovereign issuance, i.e. basically those issued by the Government. We issued our first one last year with postal bonds. I say this because the sustainable finance market is ahead of the public sustainable finance market, and this is quite an interesting element. I’ll finish quickly here by mentioning the Corporate Sustainability Reporting Directive that was mentioned at the beginning by Professor Zucca, which will be discussed later, which is basically a sort of development of the directive on non-financial reporting. This is very important because actually, the CSRD has to align with the taxonomy and the other European regulations. So basically, this is very important because I have summarised here the three most important regulations at the moment. So, the taxonomy, which talks about shared classifications – financial operators divide sustainable activities – Non-Financial Reporting and then CSRD, which seems to relate more to companies that have to disclose reliable information and measurable data on their investment policies, and then the disclosure of sustainability in the financial sector, which is essentially based on the concept of communication, information, and transparency. These, let’s say, are the principles that guide these regulatory acts. A few innovations are the latest arrivals, so I’m not going to talk about the whole process of the mass of measures that have been produced in the meantime between one regulation and another. I’ll just mention very quickly these aspects that represent some of the latest policy developments: the first is the proposal of the CSRD with the aim of increasing the quality, quantity and ability to compare sustainability information, keep in mind that this is essential for one of the main problems is precisely the finding of data and the finding of measurable data and then the goal of broadening the scope of application, you know, non-financial reporting is mandatory for companies over 500 employees, now the goal is to lower it to 250 employees. Therefore, we are basically talking about a range that goes from 11 thousand companies more or less in our Country to 50 thousand 49 thousand companies that could be affected by the CSRD. However, in reality, this directive is intended to have a much broader scope, you see it must always be linked to the taxonomy room, that is, all these elements must be somehow coordinated and consistent with the taxonomy. There has been a lot of talk about the new complementary delegate act, even in the media, sometimes in an inaccurate way, where basically gas and nuclear energy are included as transitional activities within the green taxonomy. So, as you know, there has been much debate here, among whom the green taxonomy process was based on the so-called science-based approach – which basically says that gas cannot be considered a fossil energy; others consider it fundamental for the transition – and now I only mention the fact that this is a matter of discussion, but these two forms of energy production have been included in the green taxonomy. It is very important to emphasise that the taxonomy does not define what is and what is not sustainable, so basically, there is no ban on producing gas. The issue that has been the subject of debate, sometimes quite intensely, is whether gas can be considered a green or at least a transitional energy source. So basically, this has been a recent debate in recent weeks that I just wanted to mention. Other technical standards of implementation for the ESG disclosure of banks, so I mean very important here too, just somehow pushing towards standards that are more adherent to the needs of the market, so with a proposed EU Green Bond Standard on a voluntary basis to guide the market with the use of proceeds aligned to the taxonomy to transparency to external verification with the supervision of ESMA. So, we can say that this is the latest policy news. Finally, I just wanted to give some feedback on the impact of these European regulations on businesses, and basically the relationship between investors and businesses in this new framework linked to sustainability. As far as our country is concerned, where we do not have the German economic structure, small and medium-sized enterprises are fundamental. Therefore, the new development process, and the process, let us say, linked to the 2030 Agenda, decarbonisation and everything that is in some way linked to improving environmental conditions, also requires support for small and medium-sized enterprises, which have obviously suffered very significant damage during the pandemic. Here I would just like to make two remarks on a series of studies that we have carried out, this one in particular with DOXA, to assess the perception of a sample of around 500 companies that we surveyed, with regard to their awareness of the issue of sustainability and how important it is. You can see that, in reality, we have a fairly consistent slice of those who responded very much and fairly much, i.e. over 80% of the companies surveyed said they were aware of the issue of sustainability and understood that it is a very, very important issue. Then we made a distinction between sectors, which I won’t go into too much detail about. I just wanted to show you this last slide, regarding the relationship between companies and credit in the context of the assessment of ESG aspects, so in a certain sense, the question was: “In your opinion, when granting credit, should financial operators also assess ESG aspects? 81% answered yes. In actual fact, on the one hand, there is this tendency among surveyed companies. However, on the other hand, there are no real sustainability policies, which are somehow internalised within the company, and this leads to a mismatch between investors and companies, precisely because of what was mentioned earlier, namely the fact that reliable and measurable data is available, which is often difficult to collect from small and medium-sized companies. Finally, with reference to the question we asked regarding sustainability ratings, we asked: “What was the level of knowledge of some of the instruments we identified, i.e., the legality rating, the sustainability rating, the social rating, and the non-financial statement?” You can see the various rates, and unfortunately, there is a high percentage of companies that have never heard of the non-financial statement. This is a problem in the sense that it obviously raises a very important issue of technical assistance, which I believe will be one of the issues that we will now certainly have to pursue in order to ensure that, among other things, in the day-to-day practice of businesses, European regulations are not seen as a noose, an overly stringent constraint, but can help them in the development process. I’ll stop here and thank you.

Fabrizio ZUCCA: Thank you Francesco. We have heard many times about taxonomy so, now I guess I would hand over to Mr Luca Fornaroli, who will explain what these taxonomies are, namely social taxonomy and environmental taxonomy.

Luca FORNAROLI: Good morning. Good morning to all intramoenia and extramoenia since there are many listeners online. I have brought with me some slides that I don’t know if I can activate from the remote control or not. Taxonomy as a tool for business sustainability. In fact, the previous speaker has already said a lot, and among other things I noticed how both Zucca’s speech, where he talked about transnational responsibility, i.e. between nations according to their different levels of development, the risk of depletion of resources to the detriment of developing nations or those with lower rates of development, and that this is naturally changing with the emergence of new countries and new economic powers. On the other hand, Dr. Bicciato gave me a shiver of pleasure because he spoke, among other things, he too spoke of the trans-generational responsibility that was laid down in the Bruntland report, which he mentioned, which clearly states that we must use our resources in such a way that we are not afraid to impoverish subsequent generations. Of course, as has already been mentioned, when we talk about taxonomy, in the end, we have to refer back to the Millennium Development Goals and the 2030 Agenda: these are the 17 goals. I imagine that you have seen this image, pardon the pun, in various documents, on various sites, and so on. What I always say when I often talk about these things, especially to small and medium-sized enterprises, I imagine that many of you, especially entrepreneurs, may say ‘but what does this have to do with me, I mean, these are not topics that concern me directly, they are macro topics’. In reality, what we are doing in several places is to identify indicators, and the taxonomy is basically a form, a type of indicators, that allow me to understand what I am doing to achieve the Millennium Goals, what contribution my small company of 12 people with a turnover of € 1,500,000 can make to achieve the Millennium Goals. It could be as small as, say, changing the gas supply from one company to another. I have in mind, for example, a case where light bulbs have been changed; low-consumption light bulbs have been used; and other things like that or checking the contracts of the people whose services I use, to know whether they are actually formalised or not in terms of social taxonomy. I mean, these are all elements that somehow guarantee me a path that goes in this direction. But I didn’t want to take it too far. So, as far as taxonomy is concerned, the reference standards are the regulations. A regulation, as many of you know, is already a law of the State, so it does not have to go through the parliamentary process as soon as it is published in the Official Journal of the European Community, the regulation becomes a law of the State and is therefore binding to all intents and purposes like any other law. A different matter is the directive, which must instead go through the transposition by parliament, so it must be transposed by an internal regulation, the internal regulation must go through parliament and, at that point, then it becomes law of the State. Therefore, when the committee believes that a given subject should be regulated by a regulation, it is telling us the full weight and importance that this action has for the committee, so much so that it believes that it should be uniform throughout Europe and adopted throughout Europe at the same time regardless of the favourable or unfavourable inclination that individual national parliaments might have. This point seems to me to be fundamental in order to understand in which area we are moving. So, the two fundamental regulations when it comes to taxonomy are: the Taxonomy Regulation, or more precisely the 2020/852 Regulation, and an integration of the same regulation which is the 2178 Regulation of 2021, almost exactly one year later. The curious thing about the Taxonomy Regulation is that the 2020/852 Regulation never mentions taxonomy, meaning that the term taxonomy is not included in the Regulation. In the next supplement, one year later, the term taxonomy appears 177 times. But curiously enough, the Taxonomy Regulation is 852, because it lays down the principles and stakes of what we know as taxonomy. Let’s move on. Some “recitals” of the Taxonomy Regulation 2021/852, explain the objectives and underlying reasons for the taxonomy regulation. The “recitals” are the initial part of the regulation; that is, they are what we might call the premises that then lead to the regulatory text. The reading of the recitals, as boring as it may seem, is actually fundamental because it allows understanding the underlying rationale of the regulation. In other words, why did the Commission decide, and why did Parliament decide to issue a regulation of this kind? There are all the reasons and also, let’s say, the process that the regulation has had since its birth. From this point of view, they are interesting. So, in order to achieve the objectives of sustainable development in the European Union, it is necessary to channel capital flows towards sustainable investments, as stated in recital 9. So, if we want sustainability to be concrete, we have to ensure that finance is oriented in this direction: economic resources must go there, because if there are no economic resources, nothing happens, as is evident. Considerandum 11: this is not the text itself, it is an extract from the text, I wanted to be clear, I did not quote it because it is not the text itself, but it was to summarise. The provision of financial products with sustainable objectives is an effective way of channeling private investment into sustainable activities. The requirements aim to increase investor confidence, and this is fundamental if there is no confidence, there is no credit, even etymologically, if they are made more aware of environmental impacts, therefore creating a culture of environmental impacts, of financial products of this type; creating visibility and addressing the problem of greenwashing. What is greenwashing? It’s marketing in the end, that is, I pretend to be green, I pretend to embrace sustainability requirements, but that’s because I need to give myself a “green touch” on the market and pretend that my products are better than others when they are not. Some might say that all the talk of electric cars versus diesel models has perhaps been influenced by greenwashing, others would say no, but in short, there is a lot to be said for this. I would like to refer back to what Professor Zucca said when he spoke of social taxonomy, which in reality is not yet an expression. We must be careful because, just as there could be greenwashing, there could be social washing, i.e. making people believe that they are in a good place from the point of view of social requirements, but then producing in countries where all the standards that we have normally accepted in our own countries are systematically violated. Typically, the use of slaves or child labour and so on. Transparency for investors, because one of the purposes of taxonomy is that investors have the information, they need to know whether they are putting their money where their values are recognised, i.e. where their eco-sustainable values are shared. So we need to adopt a system of standard environmental sustainability criteria. This criteria standardisation is a major problem because up to now, everyone has gone their own way, especially in Western countries. This means that everyone has their own certifications and their own regulations, which are more or less stringent. At that time, the United States enacted the well-known Wall Street Reform and Consumer Protection Act. This dual designation is very interesting: Wall Street Reform because it established new rules for those who wanted to be listed on Wall Street, that is, the fact that resources from war-torn countries were not to be exploited, especially from the Democratic Republic of Congo which was the one most affected, with resources coming from that area, and on the other hand it is also a Consumer Protection Act, It is a law, a consumer protection law, and therefore this makes us understand how one of the aims of the taxonomy is to inform investors, who are also consumers when I go to the bank and buy a fund or whatever I am a client/consumer/investor, so it has a socially relevant purpose from this point of view as well. So we should not damage the interests of investors, who we should not imagine as the big investor but us with investors trying to manage our savings in some way. Who is the Taxonomy Regulation intended for? It is intended for those who turn, as I repeat, also small investors, to the financial markets: I bought that fund, I bought that share and so on. And then this is a very important point: to companies that are subject to the obligation to publish a non-financial statement or a consolidated non-financial statement pursuant to Articles 19bis and 29bis respectively. If you haven’t fallen asleep, this article, let’s talk about 19bis because 29a doesn’t say anything different anyway, talks about large companies, 500 employees listed on the stock exchange on average, which have a number of obligations to deal with – all of this is contained in Directive 2013/34 which is already in force, including a brief description of the business model, a description of the policy applied by the company with regard to eco-sustainable, social, anti-corruption, etc., etc., etc., what is the result of these internal policies, the related risks, key indicators, performance, etc. So, one says I don’t give a damn about this stuff here, if it basically concerns those who are also public interest entities, in other words, listed companies, insurance companies, banks and so on, because “I produce tacks” or “I produce packaging”, I don’t give a damn about the agenda. In reality, this is not exactly the case, because while it is true that the Taxonomy Regulation directly addresses managers of financial assets and managers of non-financial assets, namely entrepreneurs, but of that size, investment firms, banks, credit institutions, insurance companies, and so on, among the entrepreneurs to whom it is addressed there is the large company, there are also all the companies that are part of the chain of that company, i.e. all the supply companies, even small ones, of that company are ultimately obliged to provide the same information that the large company needs to prepare its own report. So basically they are obliged to report, even if indirectly from this point of view. Many of you may have had to deal in your day-to-day experience with Life Cycle Assessment requests, so you are told “how many means of transport do you have?” Are they diesel, petrol, electric, and so on?” is something that, frankly, I didn’t see a request for until eight months ago, but for the last eight months, I’m not saying every day, from large companies to the small businesses that I deal with, they have been making requests of this kind. And it’s not easy to respond: very often this information has to be collected and it’s not easy to gather it. As I was saying, in addition to the Taxonomy Regulation, i.e. Regulation 852, there is Regulation 2178 of 2021, Article 1 of which lists a series of definitions that I invite you to look at because they are very clear. A taxonomy-aligned economic activity is an economic activity that meets the requirements of Article 3 in the Taxonomy Regulation. But what are these requirements of the Taxonomy Regulation? They are few but substantial, in the sense that in order to establish the degree of eco-sustainability of investment, economic activity is eco-sustainable if it meets the SC (Substantial Contribution) criterion. In other words, it makes a substantial contribution to achieving one or more of the objectives listed in Article 9 of the Taxonomy Regulation. Therefore, you are eco-sustainable if you contribute, if your activities contribute substantially to the achievement of those objectives which we will see. The second criterion: does not cause significant harm to any of those objectives there and then the criterion is the so-called DNSH (Do Not Significant Harm) the acronym is more complicated than the concept. The second-to-last point: it respects the minimum safeguards, a complex expression for social rights, and complies with technical criteria. So, what are these social rights, these minimum guarantees? They are nothing special, meaning that they are things that those who operate in the Italian market already have to respect if they comply with Italian law. If one is perfectly respectful and compliant with Italian law, for example with regard to the workers’ statute, then one has no problems. It is clear that we are addressing a wider market and other countries besides our own. In any case, these minimum guarantees are included in the OECD guidelines for multinational companies. Please note that when we speak of a multinational company, we do not mean a large company, but any company that operates in several different markets, perhaps with different production units. The guiding principles of the United Nations are the principles of the ILO, i.e. the International Labour Organisation, and the International Charter of Human Rights. Nothing special in the western world, I would say. If anything, I can say that the OECD guidelines in Italy are not very well known, and it might be worthwhile to hold a seminar on them because they say a lot of interesting things about company management. All this, you see, represents the social pillar of the commission’s strategy and the social pillar of the famous ESG, economic, social, and environmental pillar, is, as a document of the commission itself states, the one that then gave way to the various action plans, the first fundamental pillar of the European Union, that is to say, no action can be taken that violates social type standards. So it is a bit of a framework within which you have to move. So Zucca is right when he says that there is a sensitivity to social taxonomy, even if the term is forced, because it is the one and live view within which we must move due to the ancient tradition, probably Christian-social, that has always governed Europe after the war. Is it too early to talk about social taxonomy? Well, not really. We have a series of standards that already deal with it: SA8000, Social Accountability 8000, which some of you may have in your own company, deals exactly with these issues. The Global Reporting Initiative itself, in most of its standards, are social standards. Then there are the economic and environmental ones, but those are the most common. So they also give the criteria for how to go well beyond the minimum requirement and to have, above all, evidence at hand of your level of involvement. They specify minimum requirements that must be met in order to avoid the famous significant damage to any of the environmental objectives, taking into account the short- and long-term impact. On the other hand, they have to be quantitative if possible. If they are not quantitative they will be qualitative and then we will see this in a model that is provided as an example. They take into account the life cycle, you remember that I mentioned earlier the requests for Life Cycle Assessment and the life cycle, i.e. from the beginning, from when I obtain the materials to manufacture my product to when I deliver my product or it is delivered to my customer. This is the life cycle as far as my action is concerned. Then the product has its own life cycle which ends with the destruction, the product’s breakdown. This brings us back to what Professor Zucca was talking about: what happens to my product? Either it becomes waste, or it becomes energy, or it becomes another product, or it is recycled, depending on the process. They must be user-friendly. Article 9 of Regulation 852 is the one that sets out the corporate objectives. So, what are the corporate objectives? There are six: climate change mitigation, i.e. action on the causes of climate change and the first thing that must come to mind are greenhouse gases and there are two main ones: there is carbon dioxide and methane. Then there are also hydrofluorocarbons and others, but the two main ones are this methane that comes naturally from mining, but also from cattle breeding, these poor cows are responsible for the production of co2 methane. Methane that when burned then produces co2 again. Adaptation to climate change, on the other hand, acts on the effects. I mean, OK, we produce a lot of co2, but is there a way to reduce the amount of co2 produced? Technologies for absorbing co2, green technologies and so on, the use of plants and so on are being studied. Third point: the sustainable use and protection of marine resources. If any of you have invested in the Single Used Plastic Directive, the Directive on single-use plastics, you know what we are talking about, because it has exactly the same objective, namely to prevent single-use plastics and therefore micro plastic granules from ending up in the sea. This is a directive with an extraordinary environmental basis, which however creates some problems, as operators in the sector know very well, because in the Italian interpretation it was considered that bioplastics were not included in the directive, the European Commission opposed it with a very violent recent document – saying “you have no scientific evidence to say that bioplastics are not polluting and therefore for us, they are polluting – this means that a sector of great technological expansion. This means that a sector of major technological expansion, of major research where Italy is a leader, is in danger of being banned by a directive that would then have a social impact. Therefore, in order to protect the environment, there is a risk of blocking an innovative production sector. So, there is also a trade-off between the various taxonomies, so to speak, which the legislator must take into account. The transition to the circular economy, which I will not mention because my colleague has already talked about it, and which also provides for ISO standards – I recommend that you reduce the number of raw materials used or use more secondary raw materials. This means using raw materials that have already been obtained from a recycling process, as happens with aluminium, which is nearly always recycled. Pollution prevention and reduction, with the exception of the greenhouse effect, which is covered by the first two objectives, and protection and restoration of biodiversity and ecosystems, forest management – which is fundamental in the packaging sector, which is my sector, and in the timber sector, which is linked to the production of furniture. Management programs are a very important problem because the market is increasingly demanding the use of wood-processing products such as cellulose pulp or wood that is FSC or PFC certified, which naturally has different costs compared to normal wood. Here too, in order to protect the forests, especially in some developing countries, it is not so much of a European problem, even if the shift away from plastic towards paper has clearly upset a system of balances that used to be that of paper. Here, too, you see the impacts never end where they are dealt with. What reporting should companies adopt? From 1 January 2022 until 31 December 2022, non-financial companies shall report the share of economic activities eligible for taxonomy and not eligible for taxonomy. That means reporting those activities that comply and those that do not comply, in inverted commas, with taxonomy. Watch out for these criteria: turnover, capital expenditure, total operating expenditure and qualitative information. The details of all this stuff can be found in Annex 1 to Annex 11, depending on which sector you belong to, of the famous Regulation 2178. There you will find everything we are talking about. Of course, when we talk about turnover, we are talking about a percentage share of eco-sustainable turnover with respect to the overall turnover of your company, capital expenditure, which is exactly the same here as well, and the same for operating expenditure. In other words, it is always a comparison between the individual activities that one has set up and that comply with the taxonomy and those that are not yet compatible or that cannot be compatible. This shows the challenge then of finding this information and organising it internally as we never considered it before for financial savings companies. So, Annex number 1 to number 11 are very important. They are almost more important than the text because they are a sort of guideline. Then for each type of subject concerned, that is, of type of company of those that we mentioned before, there is more or less a couple of annexes composed of a series of indicators, instructions, definitions, methods of collecting and organising data in quantitative and qualitative form and, above all, a very useful reporting model, a very clear tabular reporting model. To give you an example, at company level, I can undertake the taxonomy and therefore sustainability both at asset level, i.e. the economic activity I carry out, so that economic activity “A” is compatible in these terms while “B” and “C”, for example, I do not know or are compatible in different terms, at project level, which is what guarantees me Green Bonds, or at company level as a whole. I’ll go a little bit faster. This is the template I was telling you about, which extracted, is copied and pasted as it is from Annex 2 of Regulation 2178. Here we have an economic activity column and where it says which activities are eligible by the taxonomy and, below, those that are not. Then, moving to the right, we have: criteria for substantial contribution, criteria for not causing significant harm. The former are all percentage criteria while the latter are yes/no criteria in another case. However, if I talk about substantial contribution, for example: climate change mitigation, what percentage of your activities contribute to climate change mitigation, as compared to your other activities? And the same for all the other objectives. These are the 6 objectives. 6 for the DSNH part and 6 for the SC part, in short, substantial criteria. On the other column you can see the share of expenditure, for example capital expenditure or turnover or etc. etc., according to the various items. Then there is also the part relating to the minimum safeguard requirements, the same thing there too, expressed in yes and no. I have made a sort of summary slide with the list of eligible activities in the taxonomy, and the list of ineligible activities that one carries out. For each eligible and ineligible activity, one need to report Key Performance Indicators relating to turnover, capital expenditure, operating expenditure CapEx and OpEx. For each of the six objectives and for each activity, indicate the eligibility criteria relating to substantial contribution and not causing damage. Minimum guarantees are expressed in terms of yes or no (yes we respect these guarantees or no). Distinguish the percentage shares of CapEx and OpEx turnover aligned and non-aligned taxonomy, we are very far from the requirements; identification of the activities of in transition, because now we are changing light bulbs, etc. etc.. So my suggestion is to do a risk analysis first, because by doing a risk analysis, apart from you already answering all the requirements related to not causing harm, because it is only yes/no and if I say I am exposed to the risk yes/no I have already answered this question. But also in terms of the substantial contribution, because I understand where I have to prioritise, as far as a preliminary analysis can go. I tried to think about what could be the pros and cons of having to comply with this kind of legislation at any level, either directly or indirectly. So, the “cons” are: further documentation, as if the documentation we already provided wasn’t enough; trouble in finding or organising information, which is what I was mentioning before; new skills to be acquired with regard to human resources, because you don’t have them in-house and therefore you have to develop them or buy them; resources and time to be dedicated, economic resources as well as human resources; counterparts who are often not qualified, so I go to the bank and there’s people who tells me things that they don’t even know about, to talk in the hard way; possible differences of interpretation on the quality and relevance of the information provided (on these issues, if you listen to me, Zucca, Brusati, or the others, we probably have different opinions on single details because it’s normal that those who deal with them don’t have just one opinion but there is a divergence of opinions and interpretations); potentially large investments to achieve the objectives, which I wouldn’t underestimate because it costs money, just think of the SUP directive which costs tremendously and for some, it means giving up certain investments; Somebody mentioned nuclear energy and greenhouse gases, which were dealt with on 2 February in a new communication from the European Commission, which says that this stuff is included in the taxonomy on the basis of a judgment of the Joint Research Centre, which is the scientific centre of the independent commission. Some may say “well, then all the investments we have made up to now are wasted…”. Clearly, this is not a yes/no logic, but there are levels below which it is necessary to remain in order to fall within the eligibility threshold. So perhaps the effort should be to stay below those levels of gas emissions. But what are the pros that perhaps matter most to us? Rationalisation of some business processes, which perhaps have never been rationalised and which we have not dealt with much, and then we discover hidden costs precisely because they have been rationalised; greater monitoring of activities, which we did not consider and which we are now beginning to consider; stronger relationships within the supply chain (if you are my supplier and I already know that you are compatible with the same requirements and have adopted the same requirements as I did, before looking for another supplier I will think twice because very often it is very expensive for me to look for an alternative); savings in terms of consumption of utilities, since I am thinking about that,  I reduce my gas supply because I am using a different energy supply or using light in a more responsible way and so on; greater involvement of human resources in a shared objective, because here we are talking about something that does not only concern companies but also concerns some of us as consumers, who are very much attracted by the product that has, let’s say, the green label, so much so that we were talking earlier about greenwashing, i.e. products that look green but are not; comparative advantage over dirty competitors, because we have made investments, including intellectual investments, that others have not made and therefore we provide products that meet certain requirements in the market, things that our competitors are not able to do; social reputation on the market, my reputation as a serious company that respects regulations and people’s rights; access to credit as a consequence and then extension of the quality criterion, i.e. it is no longer just quality of the product, of the process, it also becomes quality relating to respect for the environment, for the worker, for the consumer; growth in consumer expectations. I have finished with this and I have provided links to Excel files that may be useful. They are published by the European Commission. I will now give the floor to Professor Brusati.

Luca BRUSATI: Well, gentlemen, I’ll skip the whole introductory part because time is limited. We all know, if you are here, what is meant by ESG, and there is certainly growing attention from operators and public opinion to the issue of transparency of performance in a dimension that is not only economic and financial but also of this enigmatic thing called sustainability, which takes many different forms. On the left, there is a well-known and widely used image that says that the determinants of the value of companies are linked less and less to tangible assets and more and more to intangible assets; here, however, is a more recent survey conducted by Ernst and Young, which is a bit politically correct, saying that it is important. However, this survey, conducted over several years (2018 and 2020), shows that there is a need for greater disclosure on the part of companies, and operators are asking companies for greater disclosure on the risks linked to the ESG dimension of performance. We know that there is a regulation already in force that, in quotes, compels, is a rather soft obligation, some organizations with special characteristics, that is, they must be of collective interest and then there are large banks and large insurance companies, companies with listed securities and so on. Be careful, however, that the figure mentioned in the first speech (about 11,700) are not in Italy but at the level of the European Union the realities required to this type of reporting. There are size constraints, but it is not that all companies with more than 500 employees and assets of more than €20 million, with revenues of more than €40 million, must qualify as public interest entities. Otherwise, they can report, but this is not compulsory. It is clear that many do so as a matter of stakeholder expectations, but they do not fall under the obligations of this legislation. Two important elements of the weakness of the current approach: according to the original directive and according to the transposition with the legislative decree 254, those who report in order to comply with this obligation can choose the reporting model they want. This obviously poses enormous problems, first and foremost of venues shopping, i.e. I choose the reporting model that makes me look better and then there is no comparability because it is enough to give a reason why one has chosen one can report as one wishes. Another element of weakness, because I was saying an obligation in quotes, because if the obligation there is no type of sanction for which most companies that fall obviously comply anyway but for a matter more of political correctness than a mandatory rule. Here is an example of a well-known Italian bank that follows the legislative decree to the letter. So the structure of the reporting is, item by item, what the legislative decree states. In what sense does this represent a problem and therefore there is a need to overcome it? It is a problem both for those who have to read the information and for those who have to produce it. For those who have to read it, it is clear that when there is no comparability, it is not clear how relevant the information actually provided is. One of the reporting standards, for example, was to say well, where do you pay your taxes? There are not many companies that say that in their sustainability report. They tell you they have put paper cups but where they pay taxes they don’t write it down. Take a look at the Italian Highway sustainability report for the past few years and you’ll find some pretty interesting things. Obviously, there is a lack of comparability, which makes it difficult to make an analysis; there are some forms of certification, but they are not always particularly clear. You don’t know where to find these documents, in the sense that it’s the company’s choice how, when and to whom to make them available, and so on. Clearly, this carries a rather serious risk of greenwashing, which is not only an ethical-moral issue. It means that some companies are subject to certain risks – let’s go back to the case of Italian Highway I mentioned earlier – without the investor having any information about these risks; so, what does one need, maybe a public relations tool? Maybe. It is not enough for us. And therefore, there is a lack of accountability. Moreover, the problem is also serious on the side of companies because when the rules are unclear it becomes difficult to go and ask their suppliers of the supply chain, the requirements change over time because every moment something new comes out, I have to comply (which among other things also means that I have to change my standards of reporting so even compared to the individual company I have to change over time the data resources because there is no way to put even the comparability over time compared to the same company). This means costs in administrative overload, it is a chase of the last update that says no, but you have to put this too and there is a quite serious problem that is one of the problems that affect the European Union, the idea, the philosophy or, let’s say, the policy objective is to say: I would like more resources and, if possible, at more advantageous conditions, to go to the most sustainable projects. Also, because once we get into the budgetary constraints of the financial institutions, if I give more money at more favourable conditions to those who are sustainable, I automatically give less or no money or at higher costs to those who are not sustainable. And this is a quite intelligent model of market regulation, sustainability (…)  it was invented by the market, not by the public body, but when the public body makes transparency on market conditions, it forces a little bit the hand on a greater diffusion, a greater application of this type of financing instrument. Clearly, when there is a highly dynamic situation in which I do not know what rules will apply tomorrow, this creates problems for all operators in the system. Here is a recent example that explains how the rules are in place, then someone is caught out that maybe they said they were sustainable is not true, and there are quite important consequences of these greenwashing practices on the financial sector. At the end of April 2021, after about a year and a half of preparation, the Commission submitted a proposal for a Corporate Sustainability Reporting Directive. We note that the name of the directive has also changed: it is no longer non-financial reporting but sustainability reporting. On 6 May an important webinar with two thousand people connected to present this proposal for a directive was opened by Lagarde and closed by one of the vice-presidents of the commission (to say that the political will behind it is very strong otherwise I won’t mention Lagarde, and I think it was Dombrovskis to present this). This is because it affects us in practical terms? Who cares what is in the Brussels bubble? This is to say that the will of the commission to go ahead on this thing is strong. What does this proposal provide for then, which, I repeat, is a proposal that we will talk about later, and what I expect in this timeframe, is that this proposal for a directive should apply to all large companies, but defined according to the standard EU definition, not according to those 500 events 40 of the 2014 Directive. Therefore, the standard definition of the European Union means more than 250 full-time equivalents and a balance sheet or a balance sheet of more than 43 million euro and revenues of more than 50 million euro, plus all the other companies that are not large and have securities listed on any of the stock exchanges of the European Union, some of which are in Ljubljana. For these small companies, there are specific terms for time extensions, but we will not go into details. However, this is an issue that interests us because it has important implications that we will see later. The estimate is that this directive would apply to about 50,000 companies. From 11,700 to 50,000 is quite a leap, but we will talk about that. There are a few details here, but what interests me is probably the last one, i.e., it is true that this directive, according to what is written in the directive, does not apply to SMEs. When, however, companies have to report on their supply chain, it is obvious that they are going to ask for information, so they are asking themselves the problem: how can I make my suppliers give me the information, or, alternative approach: I choose those who can give me the information and the others… their problem. This is a theme that is already occurring. So, we don’t have time to go into the details of this list, but this list is quite scary because those who live in the Brussels bubble forget how the real world works. So not only have they put everything on there, but as we shall see in a moment, they are thinking about it in a way that, as I said directly when I spoke to the people on the committee who are dealing with it, is out of the question. Excuse me, then, or do you say that what they are focusing on externally, and in my opinion, they will also focus on in the future, is already working on issues related to climate change, and here we come back to what the previous speakers have proposed, that is, sustainability is everything, but when it comes to tightening up, we go for a fairly narrow range of topics. This is one of the very first documents, a discussion document on reporting with reference to climate standards, and the impressive thing is the 51 pages of this document alone. That’s why I was saying that in my opinion, we are going down a rather Soviet trajectory of over-regulation of detail, neglecting the reality to which these things must be applied. But there are potential solutions. This slide, and perhaps other rapporteurs after me will give you some more details, but I wanted to give you two pieces of information. So, in the document, there will be the fundamental principles and the lines of the conceptual guidelines. There is a solution that I think is quite clever then here are two approaches when it comes to sustainability reporting. The approach to the so-called principle base that says I don’t tell you specifically the indicators, because you have to adapt this tool to the characteristics of your company, which is a management logic, strategic, identification of vulnerabilities and elements to exploit is the approach that I find more clever. The problem with a so-called principle-based approach is that the documents are not comparable. Principle base typically involves the international integrated boarding council. So, the alternative approach to the so-called rule-based approach that gives you – I’m simplifying a little bit for obvious time requirements – already gives you the list of indicators. You must report on these indicators here, clearly less strategic value, more comparability. There are already several hybrids of these models. What the European Commission has in mind is a hybrid, in my opinion, intelligent approach. That is, they say, there are indicators that will have to report all companies; there are indicators that will have to be sector-specific to ensure better comparability of companies that fall within those sector-specific sectors and, then, there is room for indicators that the individual entity, i.e. the company subject to the reporting constraint, puts in place for its own business and therefore the strategic value without the element of comparability, which in my opinion is an integration, let’s say it’s an intelligent approach. In my opinion, this point is greatly underestimated, because everyone clearly thinks about reporting obligations, but this is very ambitious in management terms, because the idea, which I personally agree with, and we will see how it can be done, is that there is not only reporting, but it is necessary to establish the objectives for the following year. And then to measure the results achieved, which if done in a meaningful way is a good step forward. So (…) what is the reporting areas strategy? Where do I want to get to? Implementation. You said you were getting there. Now explain to me well how you intend to do it, but before you do it, and then tell me what you have done, not just go and tell me what you have done by choosing the areas on which you have done well. This is also challenging. Here’s what we’re saying, there are teams working with impressive speed and intelligence, it’s the mass that worries me. About the timing: second quarter of 2022 approval of the proposal for a directive by parliament by the council. The European commission notoriously does not decide when we are not talking about regulation, but it has to be the Council. Here I think there will be quite an important cut-off, I mean, I am not sure that 27 Member States will say please put these burdens on businesses. So there will be a negotiation between the Commission and the Member States (my bet is that we will start with some parts, the others will then be introduced gradually), but we will move forward, which is why I mentioned the involvement of Ms Lagarde and Mr Dombrovskis. If this path is followed, general reporting standards will be approved by October 31. They are already ready, and they are already being drafted; then October 31, 2023, the approval of sectoral standards, those of the second block, such as for comparability at a sector level, and those specific to SMEs, because there is a big debate on how to simplify them, to ensure transparency, but how and what to simplify? According to this timetable, this means that in the second quarter of 2024 the new sustainability reports drawn up according to the new criteria should be published. Since the budgets presented in 2024 must refer to the financial year 2023, if one has to start collecting the data from the first of January 2023, one must start thinking about the procedures for collecting the data before lunch. Okay, I am exaggerating a little now, but certainly in September, not in December 2022, and you are six months away. A few comments, and with that I am going to conclude. So food for thought. There has been a strong acceleration, in part (see Fridays for Future), which is to be expected, but at this level it is largely on hold, meaning that all operators are saying that we have never seen this pace of evolution in the debate. Certainly, there will be reduced margins for greenwashing, but there is still a way out, that is: if one makes selective disclosure, i.e. if one doesn’t tell you certain things, it is a mistake of omission. Therefore, we must see how the standards will be, and there could be room for selective exclusion. This point brings two aspects: what is the objective of this decision, and how will companies take it? There’s a scenario that I can see when I talk to entrepreneurs, the more uninformed ones: it gives me the tools to implement, to incorporate the strategy into my business strategies. There are those who say: I want to win this myself, I want to win the competitive battle, this is not a matter of compliance, I want to understand my business model from a perspective that incorporates sustainability. Because it can become a selling point, it can be an advantage towards my employees, the community, my customers, etc. It’s the perspective that in academia, but also in consulting, is called shared value, according to which one wins in terms of the company and the rest of the world wins. Is it a question of reputation? Let’s go back to the previous point. There is a public relations operation in which I try to dialogue – perhaps in a slightly more credible way than is the case today – with stakeholders today, because of the way sustainability reports are made. It is bad not to do so, but I wonder which stakeholder really investigates it and trusts that information as it is made. Or a logic of formal exercise, i.e. compliance. Again, this is on the regulator’s side as well as the business side. A weakness that we are trying to address to the committee: ladies and gentlemen, if today this is done as a duty by more or less 11,700 companies at European level plus another few thousand certainly that does so in a voluntary way and we have to go to do it for 50,000 on heavy standards and super detailed, where do we find those who can do this? Also, if your company is Enel, call one of the big four and you do pay certain prices, but where do you find people who do these things? Nominally, the accountants from 2005 should be able to do all this stuff. I don’t know many who are actually able to do it. There are some, they are getting interested, they are moving forward, and so on. What have they done as SSCs? For a year and a half, we have been partners in a European project working on these issues which have specifically gone on to develop, based on the model of the international integrated reporting committee, a model of integrated reporting, a guide which we have finalised in English and has been translated into Italian and a series of training modules ready in English accessible with exercises, etc. We have already been experimenting on this as part of a course we organised in four modules between November and December. Also, as part of the project in collaboration with Confapi Friuli Venezia Giulia, we have found six pilot projects that are working trained on these materials to draft the zero edition of their own sustainability report. This is one of the modules of the online training course, the slides will then be available in Italian; for the moment it is all online and only in English, but we are working on it. We want to have deliverables that in some way have not been developed only in the craziness of our working nights, but that have been tested with real operators who say: I didn’t understand anything, or yes, I did understand. So, I think that’s it. I will now hand it over to the coordination of the debate.

Andrea DELOGU: Good morning. If we were in 1750-60 we would probably have Adam Smith in the room and he would ask: how would we position ourselves in the economic field, which he was founding, sustainability? We all know that Adam Smith is famous for “The Wealth of Nations” but he, who was a philosopher, first wrote the “Theory of Moral Sentiments”. I recently read it again and I never found the definition of sustainability, but I did find several times a reference to governance. Well, we have created a panel with six speakers to try to ground all the interesting insights we have heard so far. We have a journalist, we have a magistrate who is doing, in recent times, an exemplary job as legal advisor to the Ministry of Foreign Affairs, we have a lawyer who will then also talk to us about the responsibility of directors, we have two representatives of institutional-business stakeholders. Which are (… ) and Confindustria and, lastly, who in a large company but for small companies deals with sustainability and governance, and in part, they are here present in part they are online; I would invite Luca Testoni, journalist, director of Etica News, and the magistrate who is connected, Giovanni Tartaglia Polcini, magistrate and legal advisor who will speak after our journalist, then I would invite the lawyer Federico Busatta from Gianni Origoni Law Firm, then I would invite the representatives of Assolombarda and Confindustria Bielli and Pagliuca, and at the end, Mr. Genuardi who will introduce himself. So, I would start with the journalist and director of Etica News, we have somehow created a link by talking about morality, so I would ask you to provide us with a framework, taking into account the fact that we have already had an extensive technical-legal examination, but I would ask you now to ground all the arguments.


Luca TESTONI: So, since I’m speaking as a journalist, I’m the editor of Etica News and Business Review, which is the only paper magazine that deals with environmental, social, and governance issues. I’m a rather proud man, I think it’s the only paper of its kind in Europe; it’s a six-monthly magazine that’s been around for two and a half years now, and it focuses on sustainability issues from a business and finance perspective. Speaking of journalism, I’ll start with a story about two newspaper articles that have appeared in recent weeks: one in the Financial Times and one in Responsible Investor. One was broadly titled about I tell you about ESG burnout (because I am burnout); the other title was “oh, no, another article ESG” then these anecdotes that you can find on our linked site. Or if you have a look on Google they give you the idea, they are also interesting articles because you can probably reflect on them in the sense that you can see the reflection in what they write in these letters because there are professionals who say that it is not possible. I am no longer able to follow what is happening, I realize that day by day there is such a huge amount of news or information but above all over-regulation that I cannot do it and I get exhausted and totally frustrated. We used these examples to reflect on an article we wrote a few days ago about over-regulation. The problem of the system at this time, as was also highlighted by the speeches before me, also in the professor’s speech, is an impressive list. I have marked the inverted commas, an endless list of flags, and things to tick off. I then pick up another case, a connection always with those who came before me – I don’t remember the name of the gentleman in the second row – that often those who ask for ESG information, who are asked for something in terms of ESG information, realise that those who ask, they have no idea what they are asking for. In other words, this is what we have been experiencing over the last few months, we had the perception that there has been a violent escalation of requests for sustainability information. We do not know what to answer, and if you ask these people, do you have a perception of who is asking you, do they know what they are actually asking about?  And the answer is always no. But I am under pression by a system that admits or at least notifies me that it doesn’t know where it is going. So this whole series of journalists’ stories is to say that it is clear that we are in a situation of over-regulation stress. Therefore, an excess of regulation that is not going to stop, is not going to end. On the contrary, in 2022 there is an interesting report by (…) that made an analysis and says that there are 34 consultations of 12 international bodies – 34 consultations – for standards that must close in 2022 related to environmental, social, and governance. So, consider what we have today and add on this additional load (by the way, an important directive on European sustainable governance was expected on 15 February). In my opinion, this is one of those regulations that if we have come this far today, in the sense that if we imagine our world as a whole, with this one we will completely turn it around because I expect that this legislation will actually give effect in law to the issues of stakeholder capitalism. From what I have understood, and from the consultations that have taken place, this legislation would introduce elements such as the responsibility of the board member and the ESG responsibility of the board member. The ESG responsibility of the board member is huge in horizontal terms but also vertically because they tell you that you will also be responsible to the stakeholder. This was in the consultations; we will see what comes out of it.  Within this legislation that was expected on the 15th, they said they will represent it on the February 23rd, so next week, there will then be another multiply factor not only in theory but also in practice. I have seen the new DNF mentioned, and I believe that the incoming legislation on the supply chain will have an equally disruptive effect. To date, in regulatory terms, there is just a proposal from the European Parliament asking the committee for a directive. I agree with the previous speaker that the impetus was given to the committee also has a strong political message behind it, calling for the regulation of how, within the supply chain, the purchaser must ensure that its suppliers perform more diligently. Therefore, if the taxonomy is already driving supply chains crazy today because there are companies that really do have to answer questions that they could not even imagine being put on the table until the day before, this stuff becomes fully regulated. So, take today’s rules, the frightening list that the professor mentioned earlier, and multiply it by n. Now all this, from our point of view, that is, a think-tank journal that analyses and studies information and provides consultancy on these things, means that we are faced with a dual perspective. Therefore, either we reason all to see companies, institutions, regulators, investors – because all this lacks the whole discourse of (…) regulation that is the impact of taxonomy from the financial side that in turn must go to impact on companies multiply that all the issues of complexity, either… As I was saying, we have two ways of dealing with this issue: either super compliance, i.e. all the subjects will become great accountants, not in the sense of a pejorative administrative agent, but compilers of documentation. In other words, it will become important to have the know-how to follow, to be followers, to be implementers; the other … let us stop on this. Let’s imagine this world: so, a world of super compliance. The company is aligned, so it is compliant. I believe that in such a perspective, and this is what is already happening, the institution, the regulator finds itself in a situation of Zeno’s paradox. That is, the company is always trying to get closer to the sustainability standards, then it moves on, it is a continuous pursuit of a universe of documentation and data without ever coming to an end. Because we know, we have seen, the standards continue to multiply. If you want to go deeper and deeper into detail, if you want to regulate every single part of the ESG, you have to keep on regulating and you have to keep on following. So there is a paradox in sight. And within this context, paradoxically I think the spectre that we were initially running away from is coming back: greenwashing. So, the Professor said that this whole set of rules probably reduces the possibility of greenwashing, but while it reduces the possibility of voluntary greenwashing, involuntary greenwashing, linked to the argument “I don’t know, I don’t understand, I can’t follow, I can’t do it, I can’t manage to complain” explodes. Not only that. Greenwashing in the world in which we are all compliant is also physiological. Think about what’s happening in finance the (…), so the taxonomy for finance, created the categories Article 8 and Article 9 to say the financial product is sustainable. You are in compliace because you do this and this. Do you have any idea what percentage of Articles 8 and 9 is on the market today? Can anyone give me an idea? If I say 5%, it is reasonable? If I say 40%? 40% of financial products in Europe within four months are in compliance. This is clearly not the case. I mean, it is not possible for finance to have only ESG-aligned products in a four-month period. That is where the problem of greenwashing lies. If we all fall under the umbrella of Article 8, how can we tell the difference? And here is the second way I was talking about. Then we are faced with either the road of over-regulation and super compliance or the other way, as mentioned by the regulators, is to create, to aim at raising awareness towards ESG, which we call, when we do training or consultancy, ESG identity. That is, the subject is no longer just a great accountant who fills in, answers, and fills in, but is a subject who has built this ESG identity. It means that this entity has given itself a purpose, and therefore an in-house culture, and has translated this culture into governance. This subject has translated it into commitment and has been able to translate it into a commercial structure, with precise frameworks for its products, for its services, its way of presenting itself, and is able to relate in an ESG key with its upstream and downstream supply chain, and is able to enhance this ESG standing outside. I think that this last part of enhancing oneself is almost automatic if you go all the way if you have built up governance, if you have managed to infuse your sales network with this concept, then I think that enhancing yourself externally comes almost automatically. This is true for the company that is on the market, it is true for the B2B and B2C company, but perhaps even more so for the B2B company that has to interface with a supply chain that is not the lady in the supermarket who buys the biscuits, the supply chain may give you a billion-dollar order and is not joking, that is, it really wants you to be what you are declaring yourself to be, not to beat the drum, one of the billions of labels of sustainability that exist today. And that applies to finance as well. So much so that, and here I close, with one of the exercises that we recommend today to large companies but also to smaller companies, and here I always connect to what was said before, that is that the cultural shift is to establish, to think about the establishment of this ESG identity. Therefore, it applies both to large companies and also to small and medium-sized companies. So the model (…. ) we build is able to check on this. And this is also our challenge. In recent months, we have been building a model of governance of ESG among investors and therefore among the major providers, because until now they too have limited themselves to monitoring the assets in which they invest. Thus, they go and ask: “Are the assets and grit only ESG or whatever you want?” In perspective, however, we already have concrete evidence about this on the market. They ask you who the provider is and whether the provider is sustainable. And in order to be sustainable, a provider must build its own ESG identity. I will stop here and hope that I have somehow summarised the current picture.

Andrea DELOGU: Excellently rather than journalistically, so thank you. I will now give the floor to the magistrate Dr Giovanni Tartaglia Polcini. Together with Professor Zucca we were wondering what your contribution could be, we will ask you, in particular, to deal with governance, because we have talked a lot about the subjects but behind it, there is the application by human beings, so we would ask you to focus in particular on governance. Please.

Giovanni TARTAGLIA POLCINI: thank you very much for the invitation and above all warm greetings to all of you and a special thanks to Professor Fabrizio Zucca, not only for organising this interesting event but also for his efforts in this specific area and also of course Eurispes. I see Professor Marco Ricceri whom I greet, my friend Marco Ricceri, and I respond to his invitation even if I have to introduce, also from a dogmatic point of view, the reason for my participation in this event and also the possible contribution to your debate. I am a magistrate attached to the diplomatic community and I deal with anti-corruption prevention and repression at the international level. In particular, in 2021 I chaired the anti-corruption working group of the G20 in which I am a delegate for Italy, and I am also a delegate for Italy and anti-corruption issues at the OECD in Paris,  for anti-corruption issues at the United Nations and the 2030 Agenda for Sustainable Development Goals. I must say, one of the leitmotifs of the record of our efforts from a government perspective in recent years and so, let’s say, we particularly focus our attention on how to direct government efforts towards achieving one of the ESG targets: goal number 16, which is the one that aims at ensuring peace and justice, achieving legal standards, for the whole planet by 2030. The goal is said to be one that we call cross-cutting because we argue that it is not possible to pursue and achieve the other goals if not also through this goal. It is inconceivable to achieve cross-cutting standards if not through the application of principles, values, and techniques that are designed to increase them. Goal 16 is the deontologically most challenging one, not only for governments but also for the business sector, for companies in the corporate environment. This is the first, let’s say, theoretical premise, to explain what my contribution to our debate can be; the second premise has to do with the science of international law and contemporary public international law. I am referring to a new theory which sees the principle of legality totally transformed and which is defined as the legally oriented environment or legally oriented socio-economic environment in a multilevel legal system. What is now being argued at the international level? that it is no longer time for a monologue by both national and supranational governments. It is time for an applied multi-stakeholder dialogue. In what sense? Whereas before we were discussing the possibility of placing all subjects before the law with the position of equality – which is then the ultimate purpose of the rule of law, of the principle of legality, ensuring that the various powers control each other in such a way as to prevent one from overstepping the others – this vision of rule of law is certainly confirmed. However, it is overtaken by the current structure of our planet, which entails a vertical type of structure. The legal system of the country looks upwards to those that are sources of international and supranational law and looks downwards only geometrically, not valuably, because it calls for determinations and active participation and collaborative vigilance to ensure respect for the principle of legality, civil society, and the business sector. In this new way of framing the rule of law, the role of the company, the economic operator, and the business sector has profoundly changed. And this is the term of reference to the directive that we are discussing today, especially as far as I am concerned with reference to objective 16 of the sustainable development agenda. The role of business has changed, both collectively and individually; so we are moving from the government approach to governance, as I have been asked to do. Business as a group is a privileged interlocutor of governments through systems that are now clear and shared internationally. Even in the G20, as many people are unaware, it is not only the leaders of the countries that sit there but also representatives of entrepreneurs through groups that we call engagement brooks, who present their proposals and recommendations, commenting on the adoption of measures and soft law activities by governments and giving indications of a better path. Among the engagement brooks, business twenty is one of the most active. Business individually considered in Goal 16 as a benchmark for the sustainable development agenda for demonstrating compliance with these new rules of conduct responds with one word: integrity. Integrity is the fundamental aspect for the future development of business activity. In addition, integrity refers to the need to measure corporate behaviour in compliance with rules of conduct. This is the concept of measuring corruption or the risk of corruption or the impact that rules to avoid corruption or similar behaviour have on effectiveness. Well, to bring up the project of measuring corruption in a webinar organised by Eurispes is like talking about the core business of a company within that company. This is because Eurispes has been waging a battle in recent years, first at the national level and then at the international multilateral level, to make the concept of measuring corruption as objective as possible, and to be distant from mere perception. Because often a perceptive approach, which may correspond, for example, to a consideration that from the individual company’s point of view we could define as reputational, not to say perceptive, can be absolutely misleading. We need objective indicators that are actually reliable for one simple reason: we are not talking about sociological issues, we are talking about technical and legal issues. The 2030 Agenda in Goal 16, in particular under Goals 16.4 and 16.5, refers to the concept of measuring business activity, in this case, to ensure that the gap with respect to the attainment of standards of reference for the development of ethics and legal behaviour within the enterprise and for business activity is closed, and refers to an article of the United Nations Convention against Corruption. The Merida Convention we know in acronym as UNCAC. Article 61 of the UNCAC Merida Convention states that corruption must be measured in a functional sense. It is not possible to think about measuring corruption in order to make ratings, to make rankings, to say that one company is more worthy than another, as making one government more worthy than another. This is misleading, it is ontologically wrong, and it is scientifically unsustainable. What can and must be done, however, according to the United Nations Convention on Combating Corruption, which is the instrument in this area of legal multilateralism that counts, is to have more signatures from countries, i.e. the constituency of that single convention is the largest on the planet than the Merida Convention, and corruption is measured in order to better prevent it and better repress it. We are mainly interested in the prevention chapter here. The purpose of the measurement and of these objectives 16.4, 16.5 is of an organisational nature and therefore you see that we are faced with a challenge that in a certain way we have probably already been facing for twenty years, which is that of compliance because everything in this sector is related to compliance. There is an extraordinary convergence between the concept of responsibility of entities and compliance with ESG and TDI in this specific sector, a convergence that should be promoted and should be appreciated. The circle in essence is closed. And it is no coincidence that in the latest multilateral documents there is an increasing reference to the integrity of the enterprise with reference to concepts that have been mentioned several times in this webinar, such as, for example, that of corporate social responsibility and compliance with the BAchar’s so-called business and human rights terms of reference. Furthermore, I am convinced that this type of activity will comprise most of the time of the typical consultant both in source and outsource of the future, not only looking at the approach that we have developed so far in the field of liability of echoes resulting from crime. That is, from the point of view of prevention with respect to a possible criminal repression for certain officers within a corporate structure, but also from the point of view of active participation that I was talking about at the beginning, of collaborative supervision that can be an opportunity also for companies, large companies, as well as for medium-sized companies and for small and medium-sized companies to participate in sustainable development. I would like to end this speech by evoking a paradox, because I have also heard some interesting ones. I often think in terms of paradoxes, and with Professors Ricceri and Gian Maria Fara, the president of Eurispes, we have invented a paradox that we call the Trocadero paradox. Just think that one of the most universally cited paradoxes in this field, the United Nations studies, G20 documents, is this analysis, which basically says: the more you fight corruption, the more noticeable you make it. And it is strange that having a greater perception of corruption then later manifests itself and turns out to be a negative label for a system. It’s really paradoxical, and yet, that’s what happens in this day and age. Because there are countries in which the technique of sweeping the dust under the carpet is probably used and therefore the phenomenon of corruption is not released as it is elsewhere. It is also the case with organised crime, I must say, and, instead, statistics, rankings reward inert systems and reward countries that are usually less attentive to what the reality is. But this was another paradox. I mentioned the Trocadero paradox only because we are referring to the measurement of corruption, which I also mentioned. The paradox I would like to talk to you about today is the paradox of 231, and mine is a viaticum for your efforts and above all for what you are doing as scholars, as academics, as professionals and as representatives of the economic world with reference to this crucial issue of ESG, with regard to business activity. I say this to you as an old 231 expert, because I have been dealing with the corporate responsibility for 20 years since that legislative decree was adopted in our Country to respond to five sources of international law. I see history repeating and I ask myself how to avoid the mistakes made in the past. Legislative Decree 231 of 2001 is basically 21 years old, 20 for sure. One must ask oneself if that culture of compliance is perfectly in place in our Country, if it is effectively established. In this regard, as an observer from the international point of view, I can tell you that we really find ourselves faced with discouraging data, in particular, in reconstructing the possibility, from the judicial point of view, considering the verification of the corporate conduct in the cases provided for by the Law, out of one thousand proceedings, in abstract, susceptible to include also the involvement of a company. Do you know how many are registered in the general register of the news of crime in our judicial offices? On average, one in a thousand. Furthermore, at a national level, a strange situation is recorded whereby this legislative decree finds an extraordinarily ample application in certain districts, but is absolutely non-existent in others. It is as if prevention were an elitist subject, not only from the point of view of its application in companies, but even in our courts. And why is the situation paradoxical? Because the framework of Legislative Decree 231 of 2001 is not to be considered fallacious or the cause of this poor application by itself. Quite the contrary, and here is the paradox. Many people do not know that our legislative decree 231 of 2001 has been literally copied in numerous other legal systems. In particular, I have been doing a bit of let’s say exegesis research because I had to deal with answering a questionnaire in the multilateral forum on this subject. I can tell you that in some cases it is true legislative plagiarism. The law on the liability of entities in Spain is the ley organica on the liability of entities and is entirely copied from Legislative Decree 231. Just think that one of the most important Spanish law professors who commented on this case entitled his contribution the ‘legislative plagiarism’. Like Spain, we have a replica of our regulatory model in many other countries, not only in the so-called Latin or Germanic family of legal systems but also in common law countries. I could recall the ones that come most easily to mind, Brazil, Argentina, Mexico, Peru, and Costa Rica, because I recently checked those countries and they have a legislative decree identical to ours. Therefore, we have written and created a typical and specific model that is expanding worldwide, and which is not receiving the attention it deserves. And the paradox is also an internal extension: because you all know that from the initial very limited catalogue of the crimes that were the basis of the corporate liability that had allowed the introduction in our system of the corporate liability arising from the crime, today we have reached an even plethoric vision, in my opinion almost unstoppable, of a growing catalogue that has changed the very ratio of that initial legislative decree, transforming it into a rather, in some cases, inconsistent container. And yet, in the face of this regulatory effort to broaden the range of criminal offences for which companies can be responsible, we have not seen an increase in the judicial statistics I referred to before the impact of that legislation. This is why my recommendation is to ensure that the cultural stickiness that has not allowed the legislation to be implemented, even by the courts, is not reiterated in relation to this new major challenge, which is calling. I use a strong term to draw everyone’s attention, it calls for the business sector, civil society and public administration action for the establishment of a sustainable development world. It calls for all economic operators and all legal subjects to be placed to be equal in front of the law. A law is considered a rule of law not only nationally but in a legal system that is increasingly multilevel. This is what I wanted to tell you as a contribution of experience, and I thank you for this great opportunity. I had participated, I had just read yesterday a wonderful article in the Sole 24 Ore on the subject of ESG and the fight against corruption, and I was impressed by the approach and the activities of the European Union in this area. I am available for any questions and thank you for your attention.

Andrea DELOGU: I will give the floor most naturally to Federico Busatta, if he is present. It’s a pity because it would have been an interesting point of view of a lawyer who would have focused on the responsibility of directors, in particular. So, at this point, in the absence of a lawyer, before passing the floor to the Enel representative, I would ask our sustainability officers, from Assolombarda and Confindustria, to clarify their point of view, and not only that, if we want to move from the specific to the general. So let’s start with Assolombarda.

VIANI: Thank you for your courtesy, it’s nice, we seemed to be getting back at each other. So I’m Alessandro Viani, I’ve been working at Assolombarda for quite a few years now, since 2006, and I’ve been involved in all aspects of access to credit and finance, and then sustainability issues in the broadest sense. I have always been involved since I was a student… I graduated in economics with a thesis on sustainable development and I also taught for a number of years at University. So I have been personally involved in this area for some time now, both in Assolombarda and, of course, with many other colleagues, because I think that the slides we have seen this morning show that the multidisciplinary approach to this issue is absolutely fundamental. In other words, you can’t just say it’s the job of the marketing department, it’s the job of the (…) because it’s the job of those who govern the company in the first place. So, in my opinion, the issue of governance is important in this sense here, i.e. there must be an awareness of what is being done; they cannot be isolated actions because the market will not reward them. There is going to be an incredible magnifying glass, and now I am going to take a break from the rules and try to add a few points for discussion on consistency. Companies will be measured on the consistency of their actions, that is, if the market from outside, which as has been mentioned by many speakers this morning is moving even faster than the regulatory part because they too for various conveniences including the convenience of business and on this is not that we must succeed, we have a system that moves for business convenience and we forget because here are terms that fortunately are slowly taking their place. So is this, ESG enviromental, social and government, and the economic? No, but it is taken for granted. Taking it for granted is fine, but of course you always forget the balance must also be an economic balance, otherwise, you are a philanthropist, you are not an economic entity, otherwise, you are an environmentalist. In short, there are many different terms, which are fine, but if we are talking about the sale of sustainability, we must always keep these things in mind. Finally, from my point of view, I can tell you that the legislation has changed from non-financial disclosure, which I can tell you has always the same reasoning. It is non-financial because everything that is financial is not good, it is not good, it was bad. All the financial part that companies did is a pity that financial flows are as important for the company as other things can be. Let’s at least give them equal dignity with respect to fighting climate change, going against consumer preferences, and so on. So bringing this term up here as well (…) and here too another big step forward: corporate social responsibility has always made me nervous. Why does it have to be something apart? We come from years in which we welcome that there was this aspect, now let me be a little provocative on these things. But it seems to be the compensatory approach which was used and validated many years ago. That is, when one can’t do everything through economic activity then compensate. The great lesson in this sense is that we have seen banks with foundations. Have foundations done any harm? Not at all, how many projects do they fund. But it is an approach that if you tell future generations about it today, they will no longer like the compensatory approach, and they will not be satisfied with saying, ‘I’m not good at this, I’ll create another vehicle’. That is why it is very important that as companies we reason when we asked earlier what the intent of the legislator is, to integrate strategies, to have a good relationship with their stakeholders, compliance. In other words, for us at Assolombarda the answer is unique, but also for Confindustria, which had a direct line with its colleagues in Rome and also between the two technical groups, finance and tax. Integrating strategies into sustainability because there is no other way at the business level to fully embrace all these aspects. It is a difficult challenge, and we realise this in the first place, because, being close to the territory, companies need to act in a preventive manner. When the obligations arrive on such a large scale, it is too late to say, as has been emphasised and I agree, that one should call the KPMG consultant to put the report in order. No, because it will not go well or at least you will perhaps absorb the effects of legislation and penalties but the market will not be satisfied with this thing. So you have to move first. You have to adapt, you have to understand how to do so. It is challenging for everyone, but I want to send a message on the one hand: even before there are obligations you have to think about it. Talk to the professionals, come and talk to the association, that is to say, start questioning yourself. No one expects you to become an expert in everything, but you have to acquire awareness, and you can acquire awareness when it is part of the company’s identity. When you launch a new product or a new service, you say: “I have to pay attention to these things. You have to train yourself mentally for this process. So you have to prepare beforehand, you have to try to adapt so that you don’t have to react. Because when I have to react to what someone else is imposing on me, they are imposing it on me with their rules. I didn’t have time to adapt and understand as a company how to bring out value. Then you should know that I am not telling you to surrender to what is happening, because with Confindustria, between consultations and meetings, including through Business Europe, which brings together all the European confederations of industry, we are strongly lobbying on many principles to avoid many problems for companies such as the adverse selection. That is, the regulation does not tell banks to exclude those who are not sustainable; however, if the bank, in turn, has to prove that it is sustainable, and a client arrives and does not have the beautiful, fantastic, innovative plan that another company has, but is sustainable, it will pick him up because it will achieve its objective. There are so many aspects, but, and here I can assure you, there is no going back, at least so far, all the indications tell us that we are going straight down this road. Adjustments will be made, and the timeframe is very fast, that is to say, we have never seen such a fast and organic process at the European level. So let’s take it for granted, let’s take out what positive points this upcoming legislation can give us, knowing that fortunately there are a whole series of contact points, associations, accountants, the system of consultants, that is, to whom you can turn for advice. In other words, there is a lot to be said about the importance of emphasising networks and data comparison capacity. Another very important point is the dialogue with the financial system, which is also in the middle of a Tsunami. You know, we were already talking about all the regulations that are coming from the ECB, and all these will have to train people, i.e. on the one hand you can expect that a bank is not a small company with ten people, 15 people so that with 3-4 training courses that’s it. We are talking about thousands of people with thousands of different personalities. The association system is here too, if you need it, because we have constant channels of dialogue with the financial community, with dedicated contacts to help solve problems. But above all, and this is my final point, the more we know about practical problems, the more it helps our lobbying activity as Confindustria system, but also, let’s say, to achieve a closer activity of dialogue with the interlocutors in the territory, the region, the chamber of commerce, the banks, the fintech world because we must accompany them. In other words, here it is assumed that there will be a sustainable and an unsustainable approach. Now we’ve been talking about a lot of new buzzwords, resilience, transition, but in actual fact, these are words that have real significance. Do you want to become sustainable? In my opinion the choice is necessarily that you can say no I don’t want to, but since I have to become sustainable there will be a transition necessarily. Sustainable finance only triggers if you have got there by regulation and therefore which kind of taxonomy do you have to prove you comply with in order to get there? Should I invest and, above all, what should I invest in? In those things that are normally not very popular. In the immaterial, consultancy, how to transform your company, training, which are not easily financed by the banking world. We are fighting a battle on that too, but it could be partly from the banking system and partly from the public administration through incentives. In other words, there is really a lot to be done, and in my opinion. The great thing about this is that we have to find our own way to make it work the way we like it, and by that, I mean not just as representatives of the business world or entrepreneurs. I mean all of us.

Andrea DELOGU: congratulations, it’s always nice to hear a manager of an association unit speak in such language, not just clear, but transparent. Most importantly, it’s as if he were a colleague from a company involved in business management. Congratulations. Of course, I will pass the floor and the ball to the representative of Confindustria.

Lorenzo PAGLIUCA: Yes, thank you. A lot of ideas emerged, not least because I have been a member of Confindustria as an entrepreneur for over 10 years in a representative capacity. I had the pleasure of sharing the “Banco Pass” project with Alessandro and Mr. Bielli, and I’ll tell you why I’ll bring it up later. Today, from all that has been said, we have understood that companies will have to get organised because there are new requirements. If we think about our SME group, we are talking about 160,000 enterprises, and if we include the large ones, we do not go much further. However, our entrepreneurial fabric is mainly composed of micro-enterprises, and we are talking about over 4 million of them. Then let’s look at the impact from a social point of view: the 160,000 absorb about 4 million people in the workforce; another 11 million are in micro-enterprises. If we want to give an answer to this proposal for a directive that in some way seeks to achieve the objectives that are within that acronym, those objectives can be achieved with a mass operation that is now compulsory for some while being voluntary for others. But how do we do it so that everyone can be aligned? What is the path we have to follow? Is it just a path of cultural education or do we have to provide tools? And how do we make these tools sustainable in a state of the art that we have been experiencing in recent months? We cannot just think in terms of applying a directive, and this also scares us a little, because we experienced it a few years ago. With Directive 1. 023 of 2019, the tsunami of a reform of the Business Crisis Code came to us, shared in its logic since 2015, but then, obviously, applied – and I have said this from the first day I experienced that reform – a posteriori, after the legislative decree 14 had been approved (I do not comment here on why they were late, although we did not have tables where we could discuss), it was a limited solution, that is, one could only slow the process down but could not stop it. Today we have arrived, after a constructive dialogue on the tables of confrontation, at a decree (the 118, the last one of the year about the negotiated settlement) that in some ways has also incorporated what were our positions as Confindustria. Why did I want to do this exploratory analysis even going a little further? Because we often find ourselves having to experience what is experienced at the European level as uniforming important legislation as a concept so that the entire business world can have a common path shared unanimously. At the same time, we have to deal with a variation in our country that does not take into account where we are coming from. Earlier the Magistrate mentioned Legislative Decree 231, which is also very important. It was born twenty years ago with a logic, today the predicate offences are all there, all have been absorbed, even the last one, the tax offences, and therefore in some way also incorporates the logic of insolvency and default, no longer just in terms of liability as amended in the Civil Code, because part of that reform of the Code of the business crisis from 2019 is implementing the second paragraph of 2. 086, and the second paragraph of 24 76. Therefore, also the administrative body, we were talking about governance, of a small enterprise, of a micro-enterprise has the same responsibilities as the administrative body of a joint-stock company, on supervision and on the integrity of the company’s assets. Therefore, we have always had a legislative activity aimed at transposing what is needed to be able to standardise legislation and then with a declination that does not take into account what we are experiencing. Today it is even worse with the post-pandemic effects, that is, post-health pandemic, but we are still expecting the consequences of the economic pandemic in 2022. We had measures that have frozen the pandemic effects from a patrimonial point of view and provided support from a financial point of view. What about the economic side? Now the moratoria are over, so the financial part is fine, but what about the economic part? The moratoria on leasing? The cost invoices are coming back. Are we ready to absorb them, even in a context in which we have a price increase on the cost of raw materials, on the cost of energy? As Confindustria (the Confederation of Italian Industry) said in a position at the end of the year with regard to this proposal for a directive, we fully agree, and we share the same approach. We are trying to create a timeframe that doesn’t mean taking more time, but rather one that is in line with what we are going through so that our businesses can adapt, whether they are large companies or listed SMEs, and be able to absorb new requirements into their budgets. On this point, I appreciated what Alessandro said because we often consider the evaluation of immaterial assets only as information to be given to stakeholders, to be given to others. And why not value them? We did a great job at the time with the Patent Box, there could be a re-enactment, it is not the latest version. Therefore, in some way, we need to start saying that the qualitative value that we have managed to include in the bank rating must also become a value that can be useful to increase the financial assets of a company. This can also generate further interest in making that type of investment, which does not just become a cost to be absorbed within the operating margin of the activity carried out. I am not telling you anything new, we are coming out with severely burdened balance sheets, today the incidence of financial charges on EBITDA compared to 2007 is 24 times higher. We needed to borrow from companies in order to get through this phase, so much so that we have a cost that is due to the purchase of money, which fortunately was there. We must now be able to foresee a regulatory development that can be accommodating not only for those who are obliged in the first phase but, above all, for those who must then contribute to achieving zero greenhouse gas emissions by 2050. Somehow, within this chronic situation, we must also include a part of the social balance sheet that becomes a sustainable balance sheet in its environmental and energy aspects, and in all the facets that can be used not only to fulfill obligations, but also to turn them into opportunities for growth and comparison in an increasingly globalised market. I would like to conclude with this remark: we must certainly be united, and it seems to me that the debate that has taken place today has also provided an opportunity for each of us to contribute to the institutional arena. The magistrate was right to mention the active participation we have as employers’ associations in the G20. I remember in 2012 I was President of the Young Industrialists of Southern Italy, and when I organised the conference in Capri we did just that with the young business community. There was a comparison that was made with the other colleagues from the Member States that obviously led even there maybe to a slightly exaggerated view of saying “why don’t we try to build a United States of Europe?” If we really have to standardise legislation, we were still young. Today, in a more concrete way, we realise that it is a process that we are obliged to start, and I don’t know when it will be implemented. But surely we must be able to understand that there are some rules of the game that must be standardised so that there is no unfair competition within the same countries that constitute our European community. But, at the same time, we must use the correct interpretation so that everyone can achieve it in such a way as not to suffer it, but to share it and build it jointly. I hope that there will be more opportunities for in-depth discussion, and I would like to thank the organisers, with whom we also had the opportunity to discuss this issue during the break, especially on what should be further occasions for in-depth discussion. I was saying this a few days ago to my friend Aldo Ferrara, President of Confindustria Calabria, to whom I said that perhaps we need to be even more incisive, not so much in making a comparison only between us, but especially to be able to bring this comparison to those institutional tables where there is a need to have a very pragmatic approach to a reality that could be well defined in doctrinal terms but then must have an application. I will stop here. Thank you.

Andrea DELOGU: I was talking earlier about Adam Smith, who founded, created this wonderful definition, metaphor of the invisible hand ….. we must hope that we are all going in the same direction and that therefore sustainability must become something that is not just a taxonomy, but something natural. Adam Smith created this wonderful metaphor of the baker: when we go to the baker we don’t have to rely on his generosity to buy good bread at a fair price; so we must hope that sustainable businesses are sustainable not because they are generous, but simply because it suits them to be sustainable. It suits them because in this way they produce goods and services that are more acceptable to consumers and so that this is an opportunity, a market opportunity. At this point, I give the floor for a final comment to Professor Gian Maria Fara, President of Eurispes, who will be making a speech about this interesting day today. I would also like to thank the organisers, Professor Zucca, I must say it was a very interesting occasion. I am sure that the materials that have been distributed will be available soon. Please Professor.

Marco RICCERI: I’m Marco Ricceri, the Secretary General of Eurispes, and I bring the greetings of the President, Professor Gian Maria Fara, who is unable to attend this meeting due to a health issue at the very last moment. I followed the debate and it is really extremely interesting and full of stimuli for shared action to be organised in the near future. I would like to thank Prof. Zucca for having provided this important and highly qualified opportunity. As Eurispes, we are ready to lend all the help we can, in terms of our experience, to tackle several of the major problems that have been highlighted today by the speakers, including during the panel discussion. Someone used the word Tsunami: in fact, we have entered – as the title of the event says – the decade of action. So the UN reports say that we need to speed up the processes towards sustainable development as much as possible because the risks of a breakdown in our overall system are very high and we really do risk entering a bottomless tunnel. The UN recommendation is for a decade of action and acceleration. The European Union has taken this message on board with the Green Deal and is speeding up all the regulation as much as possible, planning and programming of initiatives in this sector, linking it to a very precise objective, well illustrated in the Green Deal: by acting in this way, the European Union wants to recover its competitive capacity at the global level. Therefore, the sustainable development issue is linked, in the form of green transition, digital transition, etc., to the recovery of competitiveness of the European system. This is a very significant fact, and I would like to refer to a discussion that has emerged: the need to create collaborative tables to clarify some essential aspects and to better coordinate the actions of both businesses and institutional operators. We have therefore entered the decade of action, the European Union has accepted and decided to adopt the Green Deal, linking this process of acceleration to a discourse on competitiveness. In this way, by acting for sustainability, the European Union wants to regain competitiveness in the international scenario. Moreover, it is proceeding with an intensification of regulatory and planning acts that call for maximum collaboration and exchange between institutional decision-makers, trade representatives, and companies that experience the market according to the logic of inclusive governance that has now been defined. I would like to remind you that, once the Green Deal was approved in 2020, in February, March and April, when all the attention was focused on the Next Generation EU proposal, namely the solidarity fund to deal with the pandemic crisis, the European Commission approved a series of measures, directives on the new industrial policy, communication for small and medium-sized enterprises, and the new digital strategy. In other words, a series of very intense and far-reaching measures have changed the competitiveness scenario at European level, as a system, and within Member States. I believe that we have been very careless, in our capacity as an Italian system, with regard to these measures. By the way, I wonder, since these measures were not created without the participation of Italian public and private actors, who was involved in their definition? We have to bring together all the voices. I have in mind the communication on small and medium-sized enterprises in which, back in 2000, we talked about sustainable products by identifying individual sectors (in textiles, furniture, etc.) in which the details of single productions were listed. There is a need to recover a collaboration between the main actors of development in this acceleration phase, this is the first aspect. The second aspect concerns the coordination with the national plans. Each state is submitting national sustainable development plans to the United Nations for an international review. Italy has a plan that dates back to 2017, but it has announced that it will present its own plan this year (as do all other states, European and non-European). I believe that reflection on how the national sustainability plan is organised should enter and support the debate on Italian policies. A final consideration concerns this proposal, which has been developed with Professor Zucca, to organise a Eurispes workshop, in collaboration with external parties, precisely to examine in depth the issues and certain key aspects of sustainability. We have experience of these workshops and we would like to follow in the organisation of this structure based on voluntary participation, which aims to organise the comparison between the main actors in order to understand constraints and opportunities. The action of this laboratory is supposed to be to respond to that programme that accompanies the 2030 Agenda, namely the relationship between science and politics, in which interdisciplinary work is recommended. Let’s get beyond our boundaries, the economist must talk to the sociologist, the legal expert, the operator; let’s apply in our way of working, or let’s try to apply, even on an experimental basis, what is called the interdisciplinary approach integrated with a trans-disciplinary approach. There is a real need to go in and clarify some essential aspects. The main challenge is on the indicators: while the economic ones are quite clear and the description that has been made of the taxonomy is very important, it is fundamental, I think there is still a lot to be clarified on the environmental indicators (what do you mean? The reduction of emissions, or the protection of ecosystems?) and social indicators (what is meant? The increase in assistance, in the internal standards fairness to social responsibility, or the contribution that a company makes to the external social environment in terms of increasing the cohesion of the community within which it operates). These are open questions which the taxonomy has not yet defined, but which are applied, for example, by the main financial and credit players worldwide. We are currently conducting an in-depth study of the sustainability models applied by the Multilateral Development Banks, including the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), which are the interlocutors of the national banks. To build a discussion table with this trans-disciplinary and interdisciplinary approach on the challenge of the indicators to be applied. I believe this is a very important contribution to encourage what Prof. Zucca said at the beginning when he mentioned the circular economy, the new model, the transition from a system based on quantity to a system based on quality. The value of intangibles and the value of the new professions have been correctly highlighted. In short, there is a collective effort that needs to be organised: perhaps a round table that freely discusses certain open points, which are crucial, can make a very important contribution. I mentioned earlier the role and the recommendations of the Multilateral Development Banks in terms of sustainability. To a closer look, we can observe how these banks have matured: what was the idea of the EIB and EBRD’s social approach, or what was the idea of the EIB and EBRD’s environmental approach, at the beginning was simply reducing emissions, increasing widespread assistance, and so on. But today, two or three years later, they have become very complex. We really need to be aware of these changes, which then affect the granting of credits and financial relations. Moreover, we need to spread this awareness through joint collaborative action. We are moving towards the logic of inclusive governance. We think that a round table, a workshop as a discussion table on the key points will help, will be able to make a big contribution to accelerating the process, which is now a compulsory route that will intensify as we start this decade. Thanks to all of you. Eurispes, with its experience of over 30 years of investigating these issues, is making itself available, hoping to be helpful to everyone.

Fabrizio ZUCCA: As you well know, I am the first to support the fact that we need to bring the debate into a more systemic phase, so trying to bring out what is, in fact, the extent of a change, of an ecological transition, so not just a trivial energy transition. With the opportunity of the workshop, we hope to be able to attract a sufficiently large number of experts from various sectors with whom we can put together a vision to be shared and published in the coming months. I would like to thank all those who had the persistence to stay connected all morning and all the people who came to see us in the hall. I would say that as a first event we decided to make a quite long event, but it included all the new things that are forthcoming, our vision of sustainability. I thank you all and hope to see you next time.



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