Are you on board with ESG?

March 2024 - The three letters stand for Environmental, Social and Governance. But what else do you know about ESG? And why is it something you really can't ignore this year as an entrepreneur?

Sustainability and corporate social responsibility are terms that have been around for a long time. Most entrepreneurs don't lose any sleep over them. But that will soon change. Last year, the European Commission approved a new law on sustainability reporting that will have major consequences for both small and large companies.

CSRD

The so-called Corporate Sustainability Reporting (CSRD) will impact some 50,000 European companies. They will have to publish a comprehensive annual report that accurately lists their impact on people, the environment and society. Moreover, the information must also be reviewed through an external audit. According to the European Commission, this transparency should accelerate the transition to a greener Europe. The measure therefore fits into the so-called Green Deal.

Also for SMEs

At first glance, the new obligations apply only to large and publicly traded companies. But indirectly, their suppliers will also have to strive for sustainability in various areas. Because, the directive says: the sustainability of a large company depends on the sustainability of its entire value chain, including its products and services, its business relationships and its supply chain.

ESG concrete

But what does ESG mean in concrete terms? In other words, what efforts should companies make to meet sustainability standards?

It involves sustainability criteria in three areas:

1. Environmental

·      waste management

·      reduction of greenhouse gas emissions

·      reduction of environmental risks

·      energy efficiency

·      reducing air and water pollution

·      restoring biodiversity

2. Social:

·      compliance with human and labor rights

·      prevention of workplace accidents

·      social dialogue

·      gender diversity

·      pay gap

·      anti-corruption

·      education and training of staff

3. Governance:

·      transparency share ownership and structures

·      rights of shareholders

·      independence of board of directors

·      diversity of management

·      data transparency

·      business ethics

·      fairness of executive remuneration

·      presence of an audit committee

The list is not exhaustive, but still gives a good idea of the scope of ESG. It covers virtually all aspects of entrepreneurship. SMEs will have to actively engage with it, partly as a result of the new European sustainability legislation.

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