Sustainability: what it is
A new economic model
Sustainable development is that development which allows the present generation to satisfy their needs without compromising the possibility of future generations to satisfy theirs.
It is the evolution of the corporate social responsibility approach, which marked the transition from a logic of shareholder view, according to which the purpose of the company is solely to create value for its shareholders, to a logic of stakeholder view, i.e. of responsibility towards all individuals, groups and institutions which have a legitimate interest in the company and its activities and whose contribution is essential to the success of the company itself: suppliers, customers, employees, the local community, as well as obviously shareholders and managers.
An economic model oriented towards sustainability must take charge of the externalities generated by economic activities and seize development opportunities related to environmental, social and corporate governance (ESG) aspects in a long-term perspective, triggering a virtuous circle of development in capable of conserving and regenerating available resources.
In recent years, attention has been paid to environmental issues, especially with reference to the phenomenon of climate change and its impacts. More recently, also in relation to the causes and consequences of the Covid-19 pandemic, the need to reevaluate the social component has been felt. In fact, it has been understood how the damages linked to environmental change and the remedial actions can accentuate problems of a social nature, such as the conditions of inequality and vulnerability of large sections of the population, which must be taken into account for a fair and just transition.
Environmental change requires the intervention of transnational communities to protect the interests of future generations, while long-term social sustainability requires the restoration of local communities capable of rebuilding a sense of belonging, trust and safety.
The role of the financial system and credit institutions
The financial system plays a crucial role in facilitating the transition process towards the new model of sustainable development, as it is both a financially impacted entity and an engine of change.
Making sustainable finance means realizing, alongside an economic-financial return, also a socially shared advantage, thanks to the reduction of environmental risks and inequalities.
In the adoption of investment decisions, sustainable finance, therefore, takes into account environmental, social and good governance (ESG) factors, in a longer-term logic. Environmental considerations (E) refer to climate change mitigation and adaptation, as well as to the wider environment and its risks (e.g. natural disasters). Social considerations (S) can refer to issues of inequality, inclusiveness, employment relationships, investments in human capital and communities. Governance (G) of public and private institutions, includes management structures, employee relations and executive remuneration criteria and plays a key role in ensuring the inclusion of social and environmental considerations in the decision-making process.
Sustainability for a bank essentially involves two aspects.
The first concerns the bank's organization itself, its consumption, its rules and procedures, focusing on the adoption of corporate practices that are attentive, for example, to energy consumption and emissions, employee well-being and the creation of an inclusive way of work.
The second concerns the performance of its activities, referring to the implementation of commercial, credit and investment policies that favor sustainable behavior and models of production and consumption, generating a positive impact on the environment and society.
Last updated 20 December 2022 at 12:04:33