ESG reporting

ESG reporting

The acronym ESG (Environmental, Social and Governance) refers to three key criteria, which are a set of non-financial performance indicators that aim to ensure that an organisation is accountable. These criteria are currently the subject of extensive debate. The individual indicators of the ESG criteria are relatively open to interpretation, but as a whole they provide a framework for assessing corporate sustainability, social responsibility and internal governance mechanisms.

The environmental indicator focuses on the environmental aspects of a business, such as natural resource consumption, carbon footprint, energy efficiency or environmental innovation. The assessment of the environmental impact of a company’s business is a key indicator for many investors and is given a high priority in the assessment of ESG criteria.

Social indicators address the social responsibility of the company and its relationship with its employees, communities and society as a whole. They include an assessment of working conditions, customer satisfaction, in terms of the possibility of complaints or, for example, consumer guarantees, the extent to which the company’s charitable activities or its production processes have an impact on the company.

Governance indicators relate to the way a company is governed and its internal mechanisms. These include internal controls, transparency, ethical standards and accountability to shareholders and other stakeholders.

In terms of legislation, Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in financial services, which harmonises the rules for financial market participants and financial advisers, falls under ESG. The regulation relates to transparency and requires them to disclose information on their sustainability-related policies.

The ESG also concerns the so-called CSRD, the Corporate Sustainability Reporting Directive on non-financial reporting, approved on 28 November 2022, which introduces sustainability reporting obligations for public interest companies with more than 500 employees as from 1 January 2024. From 1 January 2025, other companies that meet 2 of the following 3 criteria (a) having 250 or more employees, (b) an annual turnover of more than EUR 40 million and (c) total assets of more than EUR 20 million will also be obliged to report, and from 1 January 2026 the reporting obligation will also apply to SMEs. The publication of the first reports will then take place in each of the years following the reporting obligation.

ESG criteria are thus becoming an integral part of modern business and investing. They create a kind of status for a company, which determines the willingness of investors to invest in it. This is because investors are no longer ignoring the threats posed by climate change, gender discrimination or employment bullying. At the same time, good ESG status represents greater future potential for investors, as the company is concerned about the impact of its activities and does not hesitate to release more resources for more sustainable services. ESG criteria are becoming a relevant topic, especially in a ‘Western’ environment. Therefore, when companies seek a Western investor, ESG is a focus and more active consideration.

And for such companies, the SAMAK consulting group is there. We will provide you with comprehensive advice, from orienting yourself in the subject matter to choosing the right solution tailored to your company.