Sustainable development: the social role of business

Promoting and disseminating a global economy for fair, sustainable development underpinned by ethical principles and values requires co-planning and collaboration of all social, civil and institutional actors.

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In Italy, we are waiting for the principle of environmental protection and sustainable development to be enshrined in the Constitution; this would strengthen existing and subsequent legislation, which would have to comply with the Constitution and oblige the legislator to no longer ignore sustainability.

Promoting and disseminating a global economy that is fair, sustainable and underpinned by ethical principles and values requires the co-planning and collaboration of all social, civil and institutional actors. One of today’s main challenges is to foster greater awareness among companies of the impact of their economic activity in terms of social and environmental sustainability. New sustainable business models need to be adopted; today, many companies show less defined boundaries than a traditional, shareholder-oriented, profit-generating enterprise; Some are characterised by a more hybrid management as their mission includes both social aspects to generate a social impact for communities, local areas, rural areas and environmental aspects on how the company can be a source of generation of positive environmental impact and therefore a resource to combat climate change, pollution, or how it can move away from an “extractive” way of doing business to a “generative” way of shared value.

In its ecosystem and in its relations with institutions and governments, business takes on a primary but also ‘social’ role, since it is able to respond to primary and sometimes latent needs that are not satisfied by public action. In this sense, business becomes subsidiary to the state, working alongside it to solve the problems and needs of citizens.

In this historical period there is an awareness of the need to reconcile the economic and social world with the environment, with its ecosystem. For decades, companies have acted according to the idea of capitalism inspired by economist Milton Friedman, according to which the ultimate goal of a company is to create value for its shareholders. Today, however, the current scenario calls for some reflection on how to tackle issues such as growing inequality, increasing environmental risks and the difficulties of governments in pursuing adequate welfare policies. The turning point for ethical capitalism is the Green New Deal, the Next Generation EU, the NRP, but above all the spread of new ways of doing business, thus enabling companies to take on a responsible social role.

Now more than ever, we need to rethink our everyday behaviour so that virtuous behaviour prevails, both towards ourselves and others and towards the environment. Everyone becomes an active part of a new process aimed at achieving more sustainable economic, social and environmental development. First and foremost, political measures are needed immediately to support businesses in terms of demand and consumption, in order to trigger a virtuous circular path. But implementing policies are also needed to encourage companies to adopt new business models with an approach to sustainability and social responsibility in their commercial operations and in their relations with stakeholders.

It is necessary to give legal force to sustainable development by definitively enshrining it as a principle in our Constitution, as already provided for in a draft law no. 240 of 23 March 2018. It is also necessary to make it binding for all companies to commit to integrating certain sustainable development objectives, the SDGs set out in the United Nations’ 2030 Agenda, into their economic strategies. SDGs envisaged by the United Nations in the 2030 Agenda, and then highlighting them by drawing up a social report.

In Italy, two first “timid” initiatives in this sense have been introduced: the Legislative Decree of 30 December 2016 on Non-Financial Information and Law 208/2015 with the admissibility of the legal qualification of the Benefit Company.

The adoption of the EU Directive 95/2014 with the Legislative Decree of 30 December 2016 on Non-Financial Disclosures requires listed companies, banks and insurance companies to attach a report to their financial statements containing information on how the company operates with regard to environmental, social, personnel-related, human rights issues, and the fight against active and passive corruption.

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In the Italian legal system, a pioneering role has been recognised for companies that choose to impact positively in a deliberate and conscious manner. In fact, in 2016, Law 208/2015 introduced the legal status of the benefit company, which represents a for-profit business that combines the purpose of making a profit with the additional aim of improving the environmental and social context in which it operates by means of a statutory provision. This legislation gives legitimacy to this new way of doing business and innovativeness to the company, which for the first time can commit to measuring the impacts that its activities generate for the territory and the community.

Today, the benefit society is undoubtedly one of the valid legal instruments for bringing about that reconciliation between the economic, social and environmental worlds from which we must start again after this health emergency. The benefit society has in its DNA the determination and self-denial to take care of the common good, which is essential today to overcome the post-Covid-19 crisis and prevent future crises if concrete action is not taken immediately. Corporate social responsibility is the winning lever to overcome crises. It is clear today that the economy, detached from human values, leads the entire social system to catastrophe and that we must work for the common good by combining ethics and sustainability with profit.

Another important signal came with the new Corporate Governance Code for listed companies, approved in January 2020 by the Corporate Governance Committee, according to which the role of the administrative body of the listed company is to “guide the company by pursuing its sustainable success”. Sustainable success ‘is the creation of long-term value for the benefit of shareholders, taking into account the interests of other stakeholders relevant to the company’.

At European level, in April 2021, the European Commission adopted a series of measures on sustainable finance, including the draft “CSRD” (Corporate Sustainability Reporting Directive) on corporate sustainability reporting. The CSRD extends the scope of the reporting obligation to all large companies (whether listed or unlisted) and, from 1 January 2026, to all listed SMEs, excluding micro-enterprises. In addition, the recipients of this obligation will have to publicly report on the “impacts of the company on sustainability issues”, i.e. environmental, social and governance profiles.

The pandemic has certainly reignited the debate on the need to pursue sustainable development that is driven, not only by activists, but also at the level of political institutions and policy makers.

The global socio-environmental seriousness of the current situation, aggravated by the pandemic, demands, therefore, an awareness and consciousness-raising on the part of everyone, both governments, institutions and businesses as well as individual citizens and civil society. Only with the awareness of proactive sharing and collaboration will it be possible to become changemakers to create a new economy all together.

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