Energy efficiency: a new directive for saving and renovation targets

A new European Commission proposal on energy efficiency has been adopted with the intention for the EU to reach one of the three 2020 climate change-related targets. By 2020, the EU is to obtain a cut of 20 per cent in energy consumption – a target complementing the mandatory requirement to achieve a 20 per cent increment in the share of renewable as well as a 20 per cent emissions reduction.

The draft directive sets in a legal obligation to establish energy saving schemes in all EU member-states with energy distributors or retail energy sales companies obliged to save every year 1.5 per cent of their energy sales by volume. This target is not a binding one but an indicative one conceived as a means to stimulate a greater uptake of energy efficient practices in businesses and households. An assessment on the need for binding targets based on progress achieved will be made in 2014.

A key element of the new provisions puts the onus of leadership onto the public sector. Public organisations will be providing for the push factor driving the market uptake of energy efficient products and services via a legal obligation to purchase energy efficient products and services. The directive will require governments to double the current level of retrofitting of public sector buildings to three per cent a year.

This is an important positive development from an economic perspective as the introduction of this directive will spur a surge in demand for construction renovation works with concomitant demand for energy-efficient equipments and installations. A quick adoption of the Commission’s draft text via the co-decision procedure involving the European Parliament and the Council would ensure a demand boost at a time when the construction business is stabilising as a result of the crisis. The renovation obligation on the public sector (making up close to 12 per cent of the EU building stock) would also serve as a strong driver for higher uptake of energy efficiency in other economic sectors.

It would therefore contribute to the development of the requisite skills and knowledge base among the local construction companies and equipment providers while creating new business opportunities and jobs.

Consultation on the EU corporate governance framework

Corporate governance and corporate social responsibility are key elements in building consumers’ trust in the single market. The Commission recently reiterated its commitment to a strong and successful single market which refocuses on citizens thus regaining their trust in enhanced internal market policies. Corporate governance also contributes to the competitiveness of European business, because well run, sustainable companies are best placed to contribute to the ambitious growth targets set out in the EU2020 Strategy.

A green paper setting out a consultation on the EU corporate governance framework raises an array of issues ranging from the role of the board of directors, the company’s engagement with its shareholders and the monitoring and implementation of corporate governance codes. The green paper seeks to assess the need for EU action on several issues related to the above-mentioned topics – questions related for instance, to the gender and professional composition of boards, the mandates of non-executive directors, disclosure of remuneration, shareholder identification and the protection of minority shareholders among others.

The issues raised are very pertinent and indeed timely relevant matters in the context of the post-crisis emphasis on shifting company management accountability especially in the financial services industry. Nevertheless, the Green Paper fails to set a solid tenuous justification for the need of EU legislation on these matters.

EU initiatives in the field of corporate governance would inevitably unfold on a ‘blanket’ approach that would not take into account the distinct operational realities of companies which differ extensively on the basis of the individual company’s market situation, size and commercial remit.

Maltese business therefore believes that corporate governance rules are best dealt with at national level, with rules enacted in full respect of the specific national legal traditions, company ownership structures and the degree of maturity of the corporate governance culture prevailing in the country. Adding another layer of EU-level regulation would be counterproductive leading to the potential pitfall of hampering or even halting all-together the market-driven development of corporate governance practices.

Clearly, efficient corporate governance is critical for companies of a certain market-stake size as well as for accountability with their shareholders. Therefore a delicate balance needs to be maintained carefully calibrating the necessary minimum requirements of regulation with flexibility permitting each individual company to adapt corporate governance principles to the firm’s specific market situation and needs.

For more information on EU affairs related to business, one may contact the MBB on 2125 1719, email info@mbb.org.mt or visit www.mbb.org.mt