In our series entitled "Tuesday Mornings for Construction," the time has come to address ESG-related issues. Over the next few weeks, we'll explore how ESG is already impacting and will impact the real estate market. Today, as an introduction, we'd like to outline what ESG is, as not all of our readers may yet be familiar with it, even though the concept of "ESG" is increasingly appearing in the public sphere and, consequently, influencing business decisions. This is driven by the implementation by EU member states of EU regulations and directives aimed at increasing the harmonisation of business operations, achieving climate neutrality, and redirecting financing towards environmentally friendly investments.
What is ESG?
ESG is an acronym for the terms Environmental, Social, and Governance. In short, these are risk factors and criteria that should be considered when assessing the soundness of businesses (including developers) and their relationships with customers. ESG is increasingly being referenced in recent EU regulations. This is because EU law requires the integration of socio-environmental and corporate governance issues into the ongoing operations of companies, financing institutions, employees, and contractors. These entities should strive to adapt their internal processes to efficiently and diligently collect and report the data necessary to properly fulfill their reporting obligations under the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Reporting Directive (CSRD).
ESG-related areas
ESG-related issues are emerging in a growing number of areas. Currently, these areas include real estate, labor law, taxation, environmental protection, consulting for financial institutions and public companies, legislation and compliance, regulatory consulting, energy, public procurement, competition and consumer protection, and intellectual property protection.
ESG Challenges
Proper ESG implementation requires a gradual transformation of companies to address challenges related to, among other things, due diligence, environmental protection, and employee rights. This requires developing transparent rules for how these companies operate – in processes such as whistleblower protection, the implementation of anti-corruption codes, financing, advertising, and marketing of products and services, among other areas.
Implementation raises the issue of reporting processes and the company's impact on the broader environment – both natural and social. However, this cannot be reduced to the mere preparation of reports, which will become a mandatory element of many businesses' operations starting next year. The key is to implement a transformation that ensures the implementation of ESG standards.
Sustainable real estate
ESG in the area of real estate law means, on the one hand, new obligations for investors, developers and tenants, and on the other hand, lower investment risk, lower maintenance costs and greater comfort of life, in line with the motto of "sustainable development", assuming a quality of life at a level allowed by today's civilizational progress.
In the real estate industry, terms such as "green investments", "green construction", "green rentals" and "green loans" have become more widely used, so it seems necessary to know the etymology of these terms.
“Green construction” means building in an ecologically friendly way, minimizing CO2 emissions, which is confirmed by “green certificates” awarded to buildings in which construction solutions have been implemented that allow for saving energy, water and waste management.
“Green investments” are investments using renewable energy sources such as sun, wind, water, as well as nuclear energy in a closed fuel cycle, biomass, biogas, bioliquids and biofuels.
“Green leases” are templates of lease agreements containing relevant provisions regarding, for example, energy efficiency, the use of ecological cleaning products, waste segregation, the use of office equipment from manufacturers that adhere to the principles of sustainable development, as well as negotiating changes in this respect in existing lease agreements with tenants or landlords.
“Green loans” are cash loans dedicated to entities wishing to purchase devices or installations for obtaining energy from renewable sources, such as: photovoltaic panels, solar panels (solar panels), heat pumps, heat storage tanks, biomass boilers, etc.
We will analyze each of the above issues in more detail in subsequent articles.
Summary
ESG is both a challenge and an opportunity to fully optimize the processes within a company, regardless of its size. As a firm, we are ready to help you achieve this, and our partnership with the Warsaw University of Life Sciences (SGGW) allows us to provide comprehensive support to entrepreneurs in every aspect of ESG.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 8, 2024
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