Sustainability as an opportunity

What is ESG?

A sustainable approach to business impacts a company's attractiveness in the marketplace. It makes it easier for companies to secure funding and increases credibility with customers and business partners. Research shows that for more than half of Czechs, corporate social responsibility is important and can influence their purchasing decisions (Ipsos, 2020). Up to two-thirds of them are willing to pay more than usual for a sustainable product.

ESG is a comprehensive framework for considerate and sustainable business that emphasises the responsibility of companies towards their environment and the ethical implications of their actions. A company's ESG policy can also add value in recruiting new people and retaining existing employees. Ipsos' 2019 research shows that 78% of respondents consider it important whether their employer behaves in a socially responsible way. For Generation Z, i.e. current university graduates, this accounts for up to 94% of respondents.

The term ESG is an acronym for environmental „E“, social „S“ and governance „G“. 

Environmental „E“ refers to the standards for mandatory reporting on the environmental impacts and risks of a company's activities. It covers information on climate change mitigation or adaptation, waste management or biodiversity promotion.

Carbon footprint measurement and reporting are an important part of this. Your carbon footprint is the amount of greenhouse gases you produce in relation to your business activities, such as the use of fossil fuels for electricity, heat or transport. For measurement purposes, we categorise emissions according to the extent to which the business itself can influence their production. Factors such as the insulation of buildings, the use of energy-efficient appliances, the use of renewable energy sources or the state of the fleet are all factored into the measurement results.

Social aspects „S“​ define how to report on the impacts on people and the resulting risks within the enterprise "ecosystem". They include, for example, equal opportunities, occupational health and safety, human rights or data protection. 

Governance „G“ includes standards that specify how to report on sustainability aspects directly related to the reporting entity itself. This includes reporting on the composition and independence of the company's senior management or on procedures to prevent and detect unethical and corrupt behaviour. One solution is the introduction of an ethics hotline and regular management training on corporate criminal liability.

EU green legislation

Legislation is for many one of the main reasons to implement changes leading to greater sustainability. But frequent changes and new rules can make it difficult to keep track of the regulations. We have therefore prepared a basic overview of EU green legislation.

The Green Deal or Green Deal for Europe is a set of policy initiatives by the European Commission with the goal of achieving climate neutrality by 2050. This initiative is intended to set a binding framework that will lead to a 55% reduction in EU greenhouse gas emissions by 2030 compared to 1990. The second objective is to transform the European economy for long-term sustainability.

One of the major EU initiatives that have emerged from the Green Deal is the Fit for 55 package. This introduces new rules in the areas of climate, energy and transport, such as rules on emissions trading, national reduction targets, emission standards, energy taxation and carbon offsetting.

The EU Taxonomy is a common European classification system for environmentally sustainable company activities. The system was developed to reveal the environmental impact of individual activities, which will affect companies' access to finance in terms of attracting investment, credit or subsidies, for example. 

The taxonomy defines six environmental objectives:

1. climate change mitigation;
2. adaptation to climate change;
3. sustainable use and protection of water resources;
4. transition to a circular economy (e.g. waste prevention and recycling);
5. pollution prevention and control;
6. protection and restoration of biodiversity and ecosystems.

A business's sustainability is assessed depending on whether it meets at least one of the objectives without significantly harming any of the other objectives.

The CSRD introduces major innovations in corporate reporting. The European Commission has drafted the Corporate Sustainability Reporting Directive (CSRD), which changes the rules and sets new requirements for reporting on the sustainability of a company's activities. The Directive is expected to be transposed into Czech law by the end of 2022 with obligations estimated to be in force from 2023. The new features include:

• extension of obligations to companies with more than 250 employees and an annual turnover of more than EUR 50 million, or companies with an annual balance sheet total exceeding EUR 43 million or publicly traded companies;
• clarification of reporting requirements under EU standards;
• non-financial reporting will now be subject to mandatory audit.

Some of our upcoming seminars can help give you an overview of all the current requirements. Once you have the necessary information, you can then determine which ESG areas are most relevant for your company, whether in terms of risks, stakeholders or supply chains, business financing needs, publicly available subsidies or new legislation. 

Assess your company's strategy and business processes in terms of each part of the ESG framework. Evaluate the risks, gaps and opportunities identified. Plan steps and actions to improve them. This analysis may include, but is not limited to, measuring your carbon footprint and assessing opportunities to reduce it. Prepare an action plan to improve company processes, track progress on sustainable business and share your success with stakeholders.