Benefits of ESG
Environmental, Social, and Governance (ESG) transparency is moving out of the voluntary and into the mandatory for many European companies with the recent passing of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
However, beyond avoiding penalties for non-compliance, there are numerous other benefits to increasing your focus on ESG. Here’s five of the biggest ones:
Consumers are increasingly reporting interest in sustainable brands and products, with at least 50-60% including sustainability in their top 5 decision-making factors for purchases. Therefore, being a trusted sustainability leader in your industry can give your company a competitive advantage.
However, it is important to avoid greenwashing while advertising your sustainability activities. Not only has the recent proposal for the EU Green Claims Directive codified anti-greenwashing into European law, but there is also a significant reputational risk to being dishonest or misleading in your ESG communication. By using third-party assurance and recognised, reputable frameworks, such as those laid out by the CSRD, you can ensure that you are reporting in a trustworthy manner.
Beyond consumers, other company stakeholders are interested in reading their annual ESG reporting. Investors often use ESG scoring (e.g., EcoVadis or CDP) to assess potential investments and, importantly, their risk. This is particularly beneficial because several frameworks (including CSRD) include a double materiality assessment to assess both your largest impacts on your environment (including stakeholders) and the largest risks to your company.
Likewise, the double materiality assessment can help companies to identify their own risks with regular assessment. This is because the assessment process involves extensive consultation with stakeholders and experts in your field. Many systems focus on both financial and non-financial risks, so this process goes beyond traditional risk assessments to be a more comprehensive management system.
Finally, importantly, going more sustainable can reduce your costs as a company. Setting targets for reducing emissions, for example, can lower your operating costs, particularly if you are in a country with a carbon pricing scheme like a tax. Through continually reporting on your emissions and other impacts annually, you can monitor your progress toward these reductions and your sustainability goals.
There you have it! Five good reasons to start reporting on your Environmental, Social, and Governance activities and policies.
If you need any help understanding the relevant legislation or how to implement ESG into your company, EFF has recently established a consulting service! Our Sustainability Expert will help you understand your reporting requirements, find gaps in reporting, and set up an ESG strategy. Contact us for more information.
Do you want to implement ESG in your company?
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Marie Gomersall
Sustainability Expert
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