The Platform on Sustainable Finance published, on Monday 12 July, a draft report on social taxonomy, in which it outlines its vision of a horizontal and vertical structure, with specific governance, but also envisages the limits of the approach.
Thus, the Platform, based on several European and international texts (the European pillar of social rights, the European Social Charter and the European Convention on Human Rights), defines which activities have a substantial social contribution and which, on the contrary, have negative effects. It proposes a vertical and horizontal dimension of social taxonomy.
The vertical dimension would aim at promoting decent living standards through the improvement of basic goods and services such as water (including wastewater management), food, housing, health care, education (including vocational training). The vertical dimension would also include elements on accessibility to basic economic infrastructure, including transport, telecommunications and internet, clean electricity and financial inclusion.
As for the horizontal dimension, the Platform believes that the social taxonomy should focus on decent working conditions, consumer interests and the development of “sustainable and inclusive communities”. Respect for human rights will be crucial to the development of these criteria.
On governance, the Platform advocates good and sustainable corporate governance and transparent and non-aggressive tax planning.
The limits of social taxonomy
However, the Platform believes that there are many limits to the approach. It would not be possible, for example, to define what is socially sustainable or not without taking into account the national context and the industrial ecosystem.
The report notes that many of the objectives of the social taxonomy go beyond European competence (such as the issue of pay, collective bargaining, etc.) and are in fact a matter for the national level, where the regulatory framework varies greatly from one Member State to another.
Therefore, for the Platform, it is important to ensure that the criteria developed within the taxonomy do not favour companies located in certain jurisdictions where social legislation is stricter. In other words, it says, a social taxonomy “should not create incentives in opposition to national legislation or social partners’ autonomy”.
Another concern for the Platform is the risk of directing investment only towards certain companies, when a broader approach encompassing the contribution of companies to society is needed, especially when it comes to job creation. There is thus a risk that a social taxonomy will generate excessive red tape for SMEs.
The Platform will now seek public feedback through a consultation on these draft reports, on the basis of which it will submit final reports with its advice to the European Commission in autumn 2021.
The Commission will consider these reports in the context of the “ongoing development” of the European taxonomy, as set out in its Communication on a ‘Strategy for financing the transition to a sustainable economy’, adopted on 6 July 2021 (see EUROPE 12756/15).
For more information: https://bit.ly/3yRNNSL (Original version in French by Pascal Hansens)