*By Katerina Rogga
In order to understand how this concept came to change the course of business, we must first comprehend that ESG is analyzed in terms of: Environment, Social, Governance. But what does it entail? It encompasses the totality of actions and initiatives decided upon by a company and implemented to contribute to mitigating the impacts of climate change and creating a more sustainable future (environment), to ensure the creation of a fairer society (Social), and to develop processes and a control environment that will strengthen corporate governance (Governance) and ensure the soundness of organizations in their operations.
It is understandable, therefore, that ESG involves a holistic approach to managing corporate actions and goals and requires the adaptation of corporate strategy to a new approach that concerns the whole rather than the unit.
Suddenly, the business world shifted from continuous efforts to understand and depict ESG through measurable random indicators reflected in companies’ sustainability reports, to recognizing it as one of the key priorities of their strategy. ESG became the focal point of discussions in the boardrooms of major corporations. This is because it was understood to be the springboard for a better tomorrow and a better society to which everyone needs to invest.
It is a tool that can be leveraged within the framework of business ethics, so that on one hand, companies can help mitigate the impacts of climate change and on the other hand, take the necessary measures to effectively contribute to the creation of a more sustainable and just world.
How did 2024 become a milestone year for ESG?
It’s simple! In 2024, the trend for ESG became even more intense because the European Union introduced the Corporate Sustainability Reporting Directive (CSRD) legislation, which has a starting year for the disclosure of non-financial data of companies in 2024. This legislation comes as a result of the EU’s systematic effort in recent years to define a basic level of ESG maturity and a methodology for representing its relevant indicators, allowing for comparison of the indicators communicated by companies to measure the achievement of ESG goals.
The adoption of the relevant law by the European Union is particularly interesting because:
- It replaces existing legislation on the disclosure of non-financial information of listed companies.
- This specific legislation becomes mandatory for all companies regardless of size, based on specific criteria based on the number of employees, revenue, and balance sheet figures of the companies over a three-year horizon.
- It is the first time that the subject of non-financial reporting is established as mandatory by the legislator and henceforth raises fines for non-compliance by companies.
- It affects both companies headquartered in Europe and companies operating (generating revenue from their activities) on European soil.
- For the first time, non-financial information is integrated into financial statements and requires the disclosure of the impact of climate change on companies’ financial results through specific disclosures.
Gradually, ESG evolved from a buzzword, incorporating the entire business and transforming into a new way of operating businesses, which requires a cultural change from all to ensure its application and effectiveness.
Retrieved from: esgstories.gr
