ESG – Environmental, Social, and Governance – Reporting through public disclosure of information about a company's management of factors, also known as sustainability reporting, non-financial reporting, or non-financial reporting. This is a response to the global challenges of sustainable development through appropriate management of factors:
Environmental factors: this refers to how a company uses renewable and non-renewable resources (e.g., the amount and type of energy used, greenhouse gas emissions, efficiency in managing natural resources, the amount of waste generated, and the impact on the natural environment and biodiversity).
Social factors: allow us to measure how the company and its business activities impact the social environment – employees, customers, suppliers and the local community (health and safety, human rights, product safety).
Corporate governance: means the company's internal supervision system (procedures, standards and control mechanisms implemented to ensure effective management, improve decision-making processes, comply with legal regulations and take into account the needs of external stakeholders, ethical standards).
Goal: protecting the value of enterprises, their image and striving for operational excellence – risk management (climate change risk, both related to the transition to a low-emission economy, as well as physical risks related to specific weather phenomena, the crisis of natural resources and the loss of biodiversity, and the deepening divisions and breakdown of social cohesion), improving productivity (more efficient use of raw materials and other resources, including energy and water, is beneficial both for the planet and the company’s financial results), sustainable development (increased revenues in both companies serving business and individual customers, impact on the balance sheet of assets and the profit and loss account).
ESG factors, although their significance varies depending on the sector in which a company operates, apply equally to companies large and small. Leveraging their potential to create long-term company value is therefore becoming a measure of success. Investors and financial service providers are increasingly considering the importance of ESG issues in assessing company value . They are also an integral part of many financial instruments (e.g., loans, green bonds, and insurance products), making the financial sector one of the leaders in the ESG trend.
ESG indicators:
- Sustainable economic activity in accordance with the requirements of the EU Taxonomy
- Sustainability Management
- Environmental indicators
- Social indicators
- Corporate governance indicators
Legal regulations:
a) At the national level: The Accounting Act implementing the Directive on the disclosure of non-financial information, Regulation of the Minister of Finance of 25 May 2016 amending the regulation on current and periodic information provided by issuers of securities and conditions for recognizing as equivalent information required by the law of a non-member state (Journal of Laws of 2016, item 860);
b) At EU level: Directive 2014/95/EU on the disclosure of non-financial information, Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 known as the EU Taxonomy, Regulation SFDR 2019/2088 on disclosure of information on sustainable investments by financial market participants.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of March 28, 2023.
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