ESG: new business opportunities and a new profession on the market
At the beginning of January, we celebrated the first anniversary of the entry into force of the EU CSRD, according to which companies are obliged to report on the non-financial side of their business - sustainability. This year, ESG reporting covers listed companies, banks, insurance companies, investment funds - public trust entities, the largest entities with more than 500 employees, among others. However, for 2025, all large companies will have to report, and in the following years also small and medium-sized listed companies. Business still has a while to prepare for this, but ESG implementation is not worth leaving until the last minute. Why? ESG is a business requirement and action in this area is required of companies: employees, business partners, customers, in a word: practically everyone. The sooner an entity puts ESG in place, the sooner it will gain a competitive advantage. Preferably with professional help. Specialists with expertise in ESG reporting are already in demand in the market and will become even more important in the years to come. The ESG expert is a new profession on the labour market, with prospects.
ESG, or nihil novi
The need for ESG reporting stems from the EU's Corporate Sustainability Reporting Directive (CSRD), which was adopted in November 2022. But the regulation is not a completely new entity. It replaces the NFRD (entities that were previously required to report under the NFRD will now be the first to report under the CSRD) and expands the scope and number of entities covered by the non-financial reporting obligation.
 From the Nonfinancial Disclosure Reporting Directive.
ESG - this acronym stands for the elements on the basis of which ratings and any non-financial ranking of companies are created: E - environmental, S - social responsibility and G - corporate governance. What is all the fuss about and why are such rankings created? The analysis of the aforementioned elements provides, among others, investors, investment funds, business partners with the necessary information on the basis of which they can make decisions about which company they will do business with, who they will provide financing to, etc. They help to compare and assess the company's performance. They help to compare and evaluate entities.
"Non-financials say much more about a company than financial statements alone. They are documents that allow others to say the proverbial 'check' and find out whether a company has held itself accountable to its 'green' promises and is indeed 'eco', whether it cares about the competence of its employees and prioritises diversity, as it claims in its employer branding messages. Entrepreneurs want to know with whom they are doing business, because they themselves are held accountable for this, among other things by their customers. And ESG reporting helps them to gain this knowledge," comments Adam Targowski, course tutor for ESG Management at the Warsaw University of Technology Business School.
ESG also has a deeper meaning and global dimension. With the introduction of the CSRD, the EU wanted to get entrepreneurs in Europe to engage in the fight against the challenges of today's world - climate change, social inequalities, including those in the labour market, economic. Non-financial reporting will show what a company is actually doing in areas E, S and G (greenwashing, i.e. 'eco-consciousness' and other corporate deceptions will be harder to hide), but will also exert pressure leading to new, initiatives. Companies that have hitherto been strangers to doing business responsibly will have to prioritise and take initial action.
But is ESG and the issue of non-financial reporting really a revolution for business? No, rather an evolution. Corporate responsibility has been given a new 'label'. Companies that were no strangers to the topic of CSR will now simply have to demonstrate it according to specific guidelines, and not just in their own studies or social media posts. And the rest? They should not be defensive about ESG, because implementing ESG measures allows them to gain a competitive advantage.
ESG = gaining a competitive edge and new opportunities
ESG is a 21st century business requirement. Companies cannot afford to work with entities that are unethical, because they lose money and their good image because of it. Employees are choosing employers who offer more than just a salary, who care and, for example, care about the local community or organise charitable events. Customers, who are increasingly conscious consumers, want to give their money to brands that act fairly and care about the environment.
"Strategic consideration of ESG aspects is the optimal business model in 2024. When thinking about business development, it is worth taking these aspects into account, as ignoring them can lead to restrictions in the fight for customers and employees. The competition will not sleep through this opportunity. In a company, the important non-financial aspects need to be identified first, solutions need to be implemented, and reporting, is a 'worry' that needs to be addressed second. Although, and this needs to be done well, you need to prepare to meet this requirement," added Targowski.
The largest companies (e.g. listed companies, banks, insurance companies, investment funds, etc.) that employ more than 500 people and record revenues of min. EUR 40 million will be the first to submit CSRD-compliant ESG reports for the 2024 financial year. Another group of large entities will join them in 2025 (report submitted for 2025 in 2026), and within a few years these rules will cover the majority of entities. What if companies have not yet started preparing for this step? They still have time, but they should not wait until the last minute.
"Neglecting ESG will result in unnecessary costs and effort for the organisation, which will have to comply with the formal requirements at the last minute. It is also important to bear in mind that the other party may have requirements and this will be behind when the time comes to submit the first report. A business partner, supplier, etc. may make cooperation conditional on demonstrating that the brand is already ESG compliant," Targowski points out.
New responsibilities and... new profession
The duty to implement ESG and prepare a report on the non-financial side of the business can be outsourced by the entrepreneur to an external company or to someone inside their own organisation. In both cases, it is important to have a specialist on your side who knows all the procedures, knows how to interpret them, and keeps up with subsequent changes. In the years to come, when ESG reporting will involve more and more companies, such experts will be at a premium. Have the new regulations on responsible business contributed to the development of a new profession? There are many indications of this.
There are already faculties available on our market to gain knowledge in the area mentioned. One example is the Business School of the Warsaw University of Technology, which is launching its 'ESG Management' programme from April. This is a management course for people who want to know how to effectively manage ESG issues in their organisations. As Adam Targowski admits, it offers a look at ESG as a business model that pays off for everyone - the beneficiaries/addressees of specific sustainability solutions, that's obvious, but also the company that implements it, its customers and its business partners, rather than as another costly obligation that awaits entrepreneurs:
"ESG is not just about reporting on your business once a year. It is a set of tools that help you run your business. They are guidelines that tell you how to do it, especially when the entrepreneur is concerned about the long-term development of the business. Aspects such as the wellbeing of employees, relations with customers and other stakeholders, the business environment as a whole, and a positive impact on the environment become more important in this context. At the same time, ESG is not something that can just be introduced once and forgotten. It is a process, and it should look different in every company. ESG can be learned. And this is what we want to convey in the course for which registration has just started," convinces Targowski.
Why is ESG education worthwhile? Knowledge in this area is necessary not only for those who make decisions and lead the organisation, but also for those who manage finances, operations, sales and marketing, HR
and marketing, HR. ESG is not a separate activity of an organisation but is present throughout the organisation and touches all aspects of its operations, ESG solutions and procedures need to be well integrated into the company's strategy and a specialist will provide this.