Belgian companies will have to invest more than €38 billion to meet EU sustainability requirements. But one in five SMEs will not be able to finance the transition on their own, a new report cautions.
A "large proportion of companies" do not have sufficient resources to achieve the sustainability transition without financial assistance, a new study by Graydoncreditsafe (which provides credit data and risk information for the Belgian and international market) highlights. This impacts the competitiveness and future sustainability of Belgian businesses.
As part of the EU's Green Deal, the European Corporate Sustainability Reporting Directive imposes reporting requirements on around 50,000 European companies around their ESG (environmental, social and governance) efforts.
The reporting requirements only apply to larger companies that meet at least two of the three following criteria: have at least 250 employees, have a turnover of more than €40 million, have a balance sheet total of more than €20 million.
However, it is expected that the new reporting requirements will have a trickle down effect on smaller businesses that are part of the supply chain to these larger companies.
Billions in investment
The study highlighted that "without further intervention in the form of cash injections", some 16% of Belgian companies will not be able to cope with the transition and meet sustainability requirements. This figure breaks down to almost one in five (19.9% of SMEs) and 11.8% of large companies.
This problem is particularly acute in the Brussels-Capital Region, where 19.5% of all companies will be unable to cope with the transition without acquiring additional funds. In Wallonia, this is 18.2% of businesses and in Flanders it is 14.5%.
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Graydoncreditsafe estimates that the total transition investment will cost Belgian companies €38.3 billion – €11.9 billion from SMEs and €26.4 billion from larger companies. This is based on international studies that estimate the transition will cost around 3% of annual company revenues.
Based on available data, the study finds that 68.5% of Belgian companies will be able to finance the transition using their profits. For large companies this is 74% whilst for SMEs it is 63.4%.
If you factor in company cash reserves, a further 14% of Belgian companies should be able to afford the sustainability transition (covering 87.1% of large enterprises and 78.2% of SMEs).
