ESG stands for Environmental, Social, Governance, which are the main pillars and indicators used for reporting non-financial results of companies. ESG represents a new way of managing enterprises, striving to take into account the impact of activities on the natural environment (with particular emphasis on environmental protection and principles of sustainable development), social responsibility (relationships with stakeholders, employees, and the local community), as well as the organization and maintenance of proper corporate governance by the entrepreneur.
The idea of ESG reporting comes from the concept of CSR (Corporate Social Responsibility) and is associated with the development of awareness that the economic activity of entrepreneurs significantly affects the environment. Entrepreneurs should take actions aimed at minimizing negative impact on the environment. ESG serves as a criterion to evaluate the sustainable development of companies.
ESG Reporting Obligations
From 2024, the first group of companies have been obliged to report ESG. This obligation has been regulated in the Directive of the European Parliament and of the Council (EU) 2022/2464 of 14 December 2022, amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, which regulates issues related to corporate sustainability reporting (CSRD).
The Corporate Sustainability Reporting Directive (CSRD) imposes the obligation to disclose non-financial information. The scope of these disclosures is defined by the ESRS reporting standard, along with the indicators presented in it. It is worth noting that the obligation to report non-financial information is also specified in Article 49b of the Act of 29 September 1994 on accounting.
Environment Policies
Relating to “Environment”, companies eager to build a socially responsible image should focus on developing and consistently implementing an environmental policy aimed at protecting natural resources. The audit of a company’s activities should include, among others:
- greenhouse gas emissions,
- energy consumption,
- carbon footprint,
- hazardous waste,
- water management,
- climate risk analysis,
- use of natural resources,
- closed-loop economy.
Social Responsibility of Enterprises
Regarding the requirement of social responsibility, a company should consider employee welfare, opportunities for development and training, occupational health and safety conditions, and job rotation in its corporate policy. In the external aspect, relations with stakeholders and the local community should be taken into account. All this should be done taking into consideration the following criteria:
- promoting diversity,
- equalizing opportunities for women and men,
- counteracting discrimination, including in terms of remuneration,
- ensuring work-life balance,
- compliance with the labour code,
- care for the personal data of employees and customers and information security.
Corporate Governance as a Key Element of ESG
Corporate governance, as another element of ESG, should focus on assessing the way the company is managed, the transparency of actions considering compliance requirements, the structure of the company’s bodies, and the anti-corruption practices developed by the company. Monitoring the responsibility of management members is also important.
Benefits of Implementing an ESG Management System
Developing and implementing a proper ESG (Environmental, Social, Governance) management system can bring a host of benefits to companies, both in the short and long term. In addition to building a good reputation, a company can also reap financial benefits, such as an increase in the value of the company in the eyes of investors. Effective resource management, supply chain improvement, and emission reduction contribute to lowering business costs. It’s worth adding that there’s an increasing trend for banks and financial institutions to take into account a company’s adherence to ESG standards when granting loans or credits.
Additionally, improving the company’s image and brand is a significant benefit related to reputation. Consumers are increasingly focusing on sustainable development when choosing services and products. ESG reporting is becoming more and more common, and a lack of action in this area can lead to future difficulties, for instance, with properly valuing the company.
Author: Legal Advisor Iga Bielecka, Chałas and Associates Law Firm
Source: https://managerplus.pl/esg-nowy-obowiazek-nowe-wyzwania-dla-przedsiebiorcow-35282
