What is ESG and why should you care?

Business representatives are increasingly encountering the term ESG. However, they do not always know what this acronym actually stands for. It is nothing more than a set of criteria that allow you to assess the extent to which a company is socially, environmentally, and corporately responsible. ESG stands for Environmental, Social, and Governance. This is not a new trend, but rather the growing expectations of the market, consumers, and investors towards companies that want to build their value in the long term.

Environmental – business conducted with respect for environmental issuesThe environmental aspect is probably the easiest to imagine. In this area, companies focus on minimizing their negative impact on the planet. And this is where the real game for the future begins.

Below, we will discuss areas where ESG-friendly measures can be implemented very clearly, to the satisfaction of customers.

One of the most noticeable changes in the ESG area is that concerning energy production and use. Here, renewable energy sources come to the fore — photovoltaics, heat pumps, biomass, and biogas.

One of the key directions is the implementation of environmentally friendly methods of energy production. Instead of relying solely on traditional sources, more and more companies are opting for photovoltaic installations on building roofs, the use of heat pumps, or investment in wind turbines. This not only results in real savings on bills, but above all, a significant reduction in the carbon footprint. Imagine a restaurant that serves delicious food and is powered by solar energy – it sounds good and builds a positive image.

And while we’re on the subject of gastronomy, this is another clearly visible manifestation of ESG activities. As Wojciech Galeja, an expert in the eco-friendly packaging sector, says: Plastic containers and cutlery are slowly becoming a thing of the past. Companies that want to be up to date and meet the expectations of conscious consumers are focusing on biodegradable, compostable, recycled, and even edible packaging.

It is not only a matter of being “eco-friendly,” but also of consistency with the entire philosophy of the establishment and respect for the customer. For example, instead of disposable plastic cups, a café can use those made of cellulose pulp or encourage customers to bring their own thermoses, says the owner of Pakowanko, a company producing eco-friendly packaging.

But that’s not all. Area E also includes effective waste management, water consumption reduction, transport optimization, and pollution emission reduction. Every company, regardless of industry, can find areas where it can do better for the environment.

Social, meaning society

This ESG pillar focuses on the company’s relationships with its environment – employees, customers, suppliers, and the local community. Taking care of this aspect means building lasting social capital.

This involves treating employees fairly, providing them with appropriate working conditions, opportunities for development, and fair remuneration. It also involves promoting diversity and inclusion, and ensuring safety and health in the workplace. Companies that invest in their people are less likely to experience turnover and enjoy a better reputation.

Responsibility for products and services is also an important element. This means caring about quality and safety, but also transparency in communication with customers. An ethical approach to the supply chain is also becoming increasingly important – checking whether our business partners also comply with the principles of sustainable development.

Social engagement should not be overlooked. Many companies decide to support local initiatives, charities, or educational projects. This builds a positive image and a sense that the company is an active member of the community.

Governance, or corporate governance

This last element of ESG concerns internal rules and procedures for managing a company. It is the foundation on which the entire structure of responsible business is based.

Transparency and ethical conduct are key in this area. This involves honest management, anti-corruption measures, and compliance with laws and regulations. Diversity on management and supervisory boards is also important, as it often translates into better and more comprehensive decisions.

Good remuneration policies, personal data protection, and effective risk management are other important elements of corporate governance. Companies with well-organized internal processes are more stable and credible in the eyes of investors and partners.

Why is it worth implementing ESG in your company?

Implementing ESG principles is not just about meeting requirements, but a real investment in the future of the company. It simply pays off on many levels.

Firstly, it improves reputation and image. Consumers are becoming increasingly aware and are keen to choose products and services from companies that operate responsibly. Investors, in turn, are increasingly taking ESG criteria into account in their investment decisions.

Secondly, it increases operational efficiency. Reducing energy, water, and waste consumption often translates into real savings.

Thirdly, easier access to financing. Banks and investment funds are increasingly offering more favorable terms to companies with a good ESG strategy.

Fourthly, attracting and retaining talent. People want to work for companies that have values and operate responsibly.

ESG is no longer a trend, it is a standard that is slowly becoming the norm. It is worth looking at your company in terms of these three letters and considering where we can start to take action. It may be a small change, such as the packaging mentioned above, or something bigger, such as installing solar panels. The important thing is to get started.

Who must report ESG now, and who in the future?

ESG (Environmental, Social, Governance) reporting is an obligation that is gradually becoming mandatory for more and more companies in Poland and the European Union. The new CSRD regulations radically expand the list of entities subject to reporting, introducing deadlines and criteria according to which companies must prepare non-financial reports on sustainable development.

Currently, the following entities are required to report ESG data:

• The largest public companies (e.g., banks, insurance companies, listed companies) that have already reported non-financial data.
• Companies with more than 500 employees that meet certain financial criteria (revenues above EUR 50 million or total assets exceeding EUR 25 million).

In the coming years, the obligation will also apply to:

• From 2028 (for the 2027 financial year): all large entities that meet two of the three criteria: more than 250 employees, revenues exceeding EUR 50 million, total assets exceeding EUR 25 million — regardless of whether they are listed on the stock exchange or not.
• From 2029 (for the 2028 financial year): small and medium-sized companies listed on the stock exchange, as well as small and medium-sized public-interest entities, with the exception of micro-enterprises.
• Selected subsidiaries and branches of international corporations and entities at the head of large capital groups.

Every company should already be monitoring the entry into force of new regulations and preparing to implement ESG reporting requirements in their operations.

How to start the ESG reporting process?

Now that we know what an ESG report is and why its role in business is rapidly growing, the key question is: how to effectively start this process in your company? Preparing such a document is a complex undertaking that requires strategic planning and resource commitment. It is not just a formality, but an investment in the long-term transparency and credibility of the organization.

The first and absolutely fundamental step is to thoroughly analyze regulatory requirements and define areas relevant to your business. Before we start collecting data, it is essential to have a precise understanding of reporting standards such as ESRS (European Sustainability Reporting Standards), which form the basis for the CSRD directive. This will allow you to identify which ESG indicators and aspects are key to your industry and business model. It is equally important to diagnose what data we already have in the company (e.g., in IT systems, in existing environmental reports, or HR policies) and what gaps we need to fill by creating new information gathering processes.

Below are the key steps to help you effectively initiate the ESG reporting process:

• Conducting a double materiality assessment. This is a central element of the process. It allows you to determine which ESG topics are most relevant both from the perspective of your company’s impact on the environment and society, and from the perspective of the impact of ESG factors (e.g., climate risks, regulatory changes) on the value and financial performance of the company. This will allow the report to focus on the areas that are most strategic for your organization.
• Establish an interdisciplinary team and clearly define roles. ESG reporting requires the involvement of experts from various departments – from operations, finance, and HR to legal and communications. It is essential to appoint a project coordinator and precisely define areas of responsibility to ensure the smooth flow of information and the effective collection of necessary data.
• Develop a data management and aggregation strategy. This is often the biggest challenge. It is necessary to implement systems, procedures, and tools that will enable the effective collection, verification, aggregation, and archiving of ESG data. Addressing these issues early on will greatly facilitate the preparation of current and future reports, minimizing the risk of errors and streamlining the process.

Examples of ESG activities

• Reducing CO2 emissions: investing in energy-efficient technologies and switching to renewable energy sources to reduce the company’s carbon footprint.
• Recycling and reducing waste: implementing waste sorting programs and reducing the use of plastic and other difficult-to-recycle materials.
• Effective water management: optimizing water consumption, implementing closed-loop systems, and investing in modern water-saving technologies.
• Diversity and inclusion policy: promoting equal opportunities, hiring people from diverse backgrounds, and combating discrimination in the workplace.
• Employee health and safety: ensuring safe working conditions, regular training, and support for physical and mental health.
• Participation in local community initiatives: supporting educational projects, employee volunteering, and charitable assistance to the local community.
• Transparency and ethics in management: introducing a code of ethics, anti-corruption systems, and transparent decision-making procedures.
• Sustainable supply chain: requiring suppliers to meet ESG criteria, conducting audits, and promoting responsible purchasing practices.
• Developing green products and services: creating products with a reduced environmental impact or services that support sustainable development.
• Building an ESG culture among employees: organizing training, educational campaigns, and engaging the team in achieving common sustainable development goals.

ESG – what is it? (summary)

As you can see, ESG is an initiative concerning companies in the field of sustainable development. Although it mainly affects large companies, even small and medium-sized enterprises can do a lot to adapt their activities to ESG requirements. This is especially true as more and more people are becoming interested in the topic of corporate social responsibility, even in local communities.