Partners for Business Development: ESG - it's high time to get your bearings
29.06.2023 13:01
From next year, companies will have a new obligation - collecting data and subsequently reporting ESG. Many companies still have no idea what this entails and what impact it will have on their business.
ESG is the abbreviation for a concept and a set of criteria used to assess the social responsibility and sustainability of companies and investment projects.
It covers the environmental (Environment), social (Social) and governance (Governance) aspects.
Unlike sustainability, ESG strategy is measurable, and therefore largely based on data collection and evaluation. This contributes to a clearer assessment of how well the set goals are being met.
Companies influence the environment, which in turn shapes them
Companies will be obliged to disclose data on how well they are able to face the risks brought about by changes in the environment. At the same time, in their reports they must also focus on how they can contribute to lasting sustainability and to what extent they are able to influence these changes through their activities.
The synergy of these effects will provide a comprehensive view of their responsible business conduct.
An opportunity to get ahead of the competition
In the first phase, the directive will officially apply only to large companies, which must start reporting as early as 2025 - they will report data for 2024.
Although it might seem that the introduction of ESG reporting will be gradual and that small companies can breathe a sigh of relief for now, this is not entirely true.
When large companies seek to draw on external sources of financing, their supplier-customer chains and their relationship to questions of lasting sustainability will also be examined. That is why smaller companies should also start reporting a little earlier than the obligation imposed on them by legislation.
For large companies, correct reporting and preparation at the outset means an increase in their market rating. Companies that are ready in time for the new legislation and assessment conditions will gain a visible competitive advantage and an unequivocally better position on the pan-European market. They will be preferred by investors, potential customers, and also employees.
Now is the ideal time to start
Companies will be required to disclose a relatively large amount of new non-financial indicators. With this, the demands on data collection and evaluation also rise. This requires the necessary technological and personnel resources, along with the related preparation.
The help of external partners who can set up the processes and assist with defining and subsequently fulfilling strategies and goals is also welcome. A suitable approach is, for example, a carbon footprint calculator - www.uhlikovastopa.eu, which is overseen on the expert side by our ESG expert Ľudovít Valent.
Now is the right time to assess the current state of affairs and to plan strategically for the future in this area.
ESG will affect all areas of business
Correctly setting up ESG and reporting on it will be key. Not only in acquiring business partners, but also in successfully drawing on external sources of financing. Banks are already taking green financing into account and providing significant discounts on loans. Grant calls are oriented toward projects with an environmental aspect. Many legislative changes envisage financial relief for responsible business entities. No less important is how a company is perceived in the labour market and the loyalty of employees, which are closely linked to the setup of social policy.
The sooner companies realise this and start thinking in the same spirit, the sooner they can reap the related benefits.
ESG should not be regarded as an administrative burden, but as an opportunity that is important not only from a moral standpoint, but is also a strategic and business necessity for long-term business success.
If you need help in the area of ESG, you can confidently turn to the experts from Partneri pre Rozvoj firiem.
