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Aalto University School of Business master’s degree students Minh Quang Tran (Finance) and Touko Heikkinen (Information and Service Management) conducted a customized student business project for PwC Finland’s Partner and ESG Leader Mikael Niskala between March and June 2023. The project supervisor was Bianca Beyer, Assistant Professor from the Department of Accounting. The students frequently consulted and received feedback from the project supervisor throughout the project.

The EU taxonomy requires large companies to classify the sustainability of their activities according to a standardized framework. The aim is to get the financial market direct investments towards more environmentally sustainable solutions. The systematic rules and metrics help to standardize sustainability and combat greenwashing. The regulations are novel with financial and major companies needing to report, for the very first time for the fiscal year 2022, the sustainability alignment of their ESG activities according to the regulations. 

PwC Finland’s sustainability and ESG services help companies become more sustainable businesses. EU Taxonomy reporting is covered in sustainability reporting and verification services, in which PwC helps companies measure and report on Taxonomy issues in accordance with established governance, environmental, and reporting standards. This project helped the firm with a holistic overview complementing their findings from day-to-day operations.

More than 350 Nordic companies analyzed

In the first phase, the students looked at the level of sustainability of the Nordic companies according to the regulation and initial reporting practices. 

‘As the regulations and reports were new, there were often surprises in research. This provided highly interesting challenges. 359 Nordic companies were analyzed, and the students prepared descriptive statistics and visualizations for the mid-term meeting. This provided an early overview of the situation in the Nordics and helped to refine the research questions for the second phase during the mid-term meeting,’ tells Touko Heikkinen. 

Around 21% of the identified companies’ turnover was reported to be eligible to, at some point, be considered contributing significantly to the sustainability objectives. Only 5% of the total turnover though met the stricter criteria of being already aligned with the regulations and already contributing significantly to the current objectives of mitigating or adapting to climate change.

Beyond the Surface: Uncovering Insights through Interviews

Consequently, the research team dived deep into more ad-hoc and/or qualitative topics such as sectors and economic activities that PwC would like in-depth investigations on. 

‘The second phase also included interviews with Taxonomy-responsible people at several Finnish non-financial companies, and additionally with investment professionals at certain Finnish financial institutions. The interviews proved to be highly useful as interviewees felt more comfortable sharing their own points of view in this setting. These interviews provided more perspectives than those publicly stated, for example, in annual reports,’ tells Minh Quang Tran. 

This phase delved deeper into, for example, what challenges companies are having in dealing with the regulations and how the regulations have affected investment practices at the financial institutions. Some common themes and difficulties were identified, which provided PwC with confirmation on their internal thoughts as well as some novel insights.

‘In good cooperation with Aalto University, we discovered that there was a clear research gap around taxonomy reporting. The research was also very timely, as the first year of reporting was underway and the reporting practices are currently taking shape,’ says Mikael Niskala from PwC Finland. 

There were also interesting questions during the final meeting such as how much greenwashing can be done in EU Taxonomy reporting, if companies merely “tick the box” and do not need to explain further in their disclosures. While this was not covered by the study, it proved to be an idea worth further exploration.