WILL ESG STANDARDS CHANGE BUSINESS

Abstract

Until a few years ago, the purpose of the business investing was to increase revenue and quick returns for the owners, without taking into account how all this affects nature in a social and ecological aspect. In recent years and under the influence of the crises, more and more companies are already reviewing their place, taking into account the public interest, which led to the emergence of CSR, or business responsibility in a corporate and social direction, and recently we already have ESG (Environmental, Social and Governance, or corporate management aimed at environmental and social responsibilities.ESG is based on three conditions or components that assess or influence the sustainability of investments made, related to the environment, social impact and corporate responsibility of management, which should improve returns for owners, reducing investment risk and aiming to increase value.Environmental factors are as a manager of nature regarding observed climate changes, toxic emissions released and greenhouse effect, social focus is regarding personnel selection and management, relationships with contractors, labor safety, etc., and corporate governance concerns training and opportunities, and leadership qualities, remuneration, auditing and control, as well as ensuring openness and access to management, etc. ESG is a framework for looking at how a company impacts the environment and society, and managers to facilitate business should consider the impact of the three factors mentioned to facilitate the integration of the framework. It would be good for every business to go through a certain process to determine the important topics through the lens of ESG and plan the future for their business to meet the changing business environment. ESG is implemented through the application of standards and relevant reporting, based on the Corporate Sustainability Reporting Directive (CSRD), which specifies from 01.01.2024 that organizations with more than 250 employees and/or a turnover exceeding 40,000,000 euros to prepare reports on what is ESG impact.
Also essential is the Sustainable Finance Disclosure Regulation (SFDR), enabling investors to focus their efforts on environmental impact, social impact and governance issues. There is also the Unfair Commercial Practices Directive (UCPD) to protect various consumers from various misrepresentations and frauds by traders. There is also an EU Taxonomy to create different parameters to measure the degree of sustainability of different processes and activities. The regulator behind ESG, the European Green Deal, aims to make Europe a climate-neutral continent in the coming years. The main point is the European investment plan, which can provide about one trillion euros of investments in this direction by 2030.