ESG and Sustainable Development
The business sector's transition focusing on environmental, social responsibility, and good corporate governance is not just a trend but a crucial strategy for long-term success, business resilience and survival. EU sustainability regulations are happening here and now, and there are many concepts and acronyms in circulation. Here, we clarify how some of these are interconnected.
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What Does ESG Mean?
ESG stands for Environmental, Social, and Governance, referring to a company's responsibilities in these areas. The acronym symbolises the three dimensions of sustainability. "E" covers the management of greenhouse gas emissions, energy, waste, and biodiversity, while "S" represents workplace environment, equality, and human rights. "G" is concerned with responsible corporate governance, business ethics, anti-corruption measures, and other proprieties.
Agenda 2030
Agenda 2030 consists of 17 sustainable development goals related to ESG. These ambitious goals have been set by world leaders to be achieved by all people on earth by the year 2030. To succeed, all countries, companies, and individuals must contribute. Companies typically choose to focus on some of these global goals in their sustainability strategy, which they often present in their annual sustainability report.
What Should Be Included in a Sustainability Report?
In a statutory sustainability report companies must describe their business model, value chain, and the sustainability issues that are significant to them from environmental, social, and economic perspectives. They must account for risks and opportunities as well as short- and long-term goals. They need to show progress towards set goals and explain related policies and governance documents.
Since December 2016, the EU directive NFRD has regulated what should be included in a sustainability report. But from January 2024, the new EU directive CSRD imposes significantly stricter guidelines on how underlying analyses should be conducted and what data should be disclosed.
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What is CSRD?
CSRD stands for the Corporate Sustainability Reporting Directive, is an EU directive that governs how companies should report on sustainability. It will gradually come into effect starting in 2024, initially for large public-interest entities with more than 500 employees, and will eventually impact almost the entire business sector. CSRD introduces significantly higher standards for quality, comparability, and transparency than previously seen, with the goal of making sustainability reporting as robust as financial reporting. This is a crucial step towards achieving the EU's objective of becoming the first climate-neutral economy by 2050.
How does CSRD affect small and medium-sized enterprises (SMEs)?
Small and medium-sized enterprises (SMEs) that have large corporate clients or are in need of capital injections are indirectly affected by CSRD through inquiries and, in some cases, requirements for sustainability data. To be perceived as a serious partner, secure business deals, and obtain favorable loan conditions or green loans, it is important for SMEs to be able to provide such information. While SMEs are not required to report on sustainability as extensively as larger companies, they can certainly benefit from establishing a simpler voluntary sustainability report.
Formally, CSRD will start to apply to listed small and medium-sized enterprises on regulated markets from 2026.
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Linnea Eriksson
Senior Sustainability Consultant
Therese Svensk
Senior Sustainability Consultant
Linnea Eriksson
Senior Sustainability Consultant
Therese Svensk
Senior Sustainability Consultant
Do You Need Help with Your Sustainability Reporting?
We can assist you in accelerating and structuring your sustainability efforts.
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