Running a business in today's world is challenging. We live in times where more and more new regulations and requirements are emerging related to the impact of business on the environment.
ESG (Environmental, Social and Corporate Governance and Reporting) is a sustainable development concept that is no longer voluntary but institutionalized. This means that all businesses, regardless of size, must comply with it. The sooner you start applying ESG principles, the easier it will be for you in the future. But where to start? How do you know what affects you? And how to prepare?
Where does ESG come from??
ESG is a concept of sustainable development that is based on three main principles: environmentalism, social responsibility and corporate governance. It is not something new, but in recent years it has gained more and more popularity and is already institutionalized.
The need for regulation in this area arises from the capital markets. Investors want to know how companies manage their impact on the environment and society. ESG provides a standard against which to assess this impact.
ESG requirements affect all businesses, regardless of their size. They can have a significant impact on the financing of companies, as they are tied to lending and investing.
However, there is no reason to stress or worry. Many companies are already working in this direction, even if they don't call it ESG. They monitor their carbon footprint, strive for energy efficiency and take care of their employees.
In conclusion, ESG is an important concept that will become a major factor in business success in the future. Companies that are already working in this direction are in a better position to adapt to the changes and deal with the challenges that lie ahead.
How ESG is linked to success?
It's very simple - by better monitoring your performance, you understand what you need to improve. This is good risk management. What does good governance mean in general and what does it have to do with ESG? G is for Governance and equals integrity – what a company has declared as a value is seen in leadership and supported by relevant policies, rules, systems. Good governance in today's sense means inclusiveness, reciprocity, transparency. Integrity is what I think, what I say and what I do. Separately, some of the environmental and social topics today influence values - for example, diversity from the point of view of human rights. It's just that this wider palette creates contradictions within the company and is even more difficult to manage. For example, what is more valuable - a company adhering to its understanding of the presence of both sexes equally or hiring the person whose qualities make management want to invite him to their team?
Does ESG apply to all businesses or industries??
The Corporate Sustainability Reporting Directive (CSRD), adopted at the end of last year, leads to increased obligations for companies to report on sustainability. In this line of thinking, you fall under the scope of the new European sustainability and reporting requirements and are obliged to provide an ESG report if:
- you are a company with more than 250 people;
- you have a turnover of 40 million euros per year;
- you have a balance of EUR 20 million.
Regardless of the size of your company, you better take the path of sustainable development now in achieving your business goals and interests. Business in Bulgaria does not always think in perspective, but the smaller a company is and the fewer resources it has, the more it is subject to what happens.
What practical steps should companies take??
Many companies have probably already taken concrete actions without even realizing it. In recent years, there has been increasing talk of a circular economy, and this is due to factors such as difficult access to resources, negative environmental impacts from unsustainable production activities, overconsumption and overproduction of goods. Here are some pointers on what you can do:
- reduce the use of natural resources and primary raw materials at the expense of secondary ones;
- ensure that products have a longer life if they can be repaired or reused;
- recycle the products and the separate materials contained in them;
- reduce the use of non-recyclable products and materials;
- try to reduce waste generation etc.
Ultimately, there will come a point where all companies will have to adopt and comply with ESG regulations. However, they can also be seen as an opportunity for companies to create value by finding more efficient ways of doing business. Here are some specific benefits:
- Reducing the cost of resources and waste
- Increase efficiency and productivity
- Increase customer satisfaction
- Improving the reputation of the company
If this information has piqued your interest, then we are happy to share that Ruse Chamber of Commerce and Industry in partnership with leading consultants in the field of ESG will very soon hold an information event for all companies that fall within the scope of the new European sustainability and reporting requirements, as well as for those that are on the path of sustainable development. Follow the events on our website!