Who is affected by ESG reporting and what does it involve?

What is ESG reporting?

ESG (Environmental, Social, Governance) reporting is a process in which companies present information on their impact on the environment, society, and internal management mechanisms. The abbreviation ESG refers to three areas:

• Environmental – covers issues related to greenhouse gas emissions, energy consumption, waste management, biodiversity, and the company's impact on the climate.
• Social – concerns social responsibility, including human rights, working conditions, diversity, and relations with local communities.
• Governance – focuses on management structures, transparency, ethics, anti-corruption measures, and control mechanisms in the company.

The ESG report is not just a document – it is a confirmation that the company operates in a sustainable, transparent, and responsible manner. For many investors, it is a key indicator that shows how the company copes with the challenges of the modern world.

Who is required to report non-financially?

The ESG reporting obligation in the European Union previously applied only to large companies of particular importance to the economy, which had to meet the requirements of the NFRD (Non-Financial Reporting Directive). However, from 2024, in accordance with the new CSRD (Corporate Sustainability Reporting Directive), the scope of the reporting obligation is significantly expanded.

According to the new regulations, the ESG reporting obligation will cover:

• All large enterprises that meet at least two of the following three criteria: employ more than 250 employees, have an annual turnover above EUR 40 million, or a balance sheet total above EUR 20 million.
• Small and medium-sized enterprises listed on the stock exchange, although simplified reporting requirements are provided for them.
• International consortiums operating in the European Union.

What should be included in the ESG report?

The ESG report should comprehensively present the impact of the company's activities on the environment, society, and the way the organization is managed. The key elements that should be included in such a report are:

Environmental:

• Greenhouse gas emissions (including CO2 and other harmful gases).
• Energy consumption and the company's strategy to increase energy efficiency.
• Waste management and the way natural resources are managed.
• Climate change adaptation strategy.

Social:

• Working conditions and equality policies (e.g., regarding gender diversity, age, origin).
• Employee health and safety.
• Relations with local communities and pro-social activities.
• Principles of respecting human rights and ethical standards.

Corporate governance:

• The company's management structure, including the composition of the management board and supervisory boards.
• Transparency and ethics policy in the company.
• Corruption prevention mechanisms and compliance policy with legal regulations.

CSRD Directive – new requirements for Polish companies

The CSRD Directive introduces new ESG reporting rules, significantly expanding the reporting obligation of companies. What changes does this regulation bring?

Who does ESG reporting apply to?

While previously the reporting obligation applied only to large companies, it will now also apply to medium-sized enterprises and those listed on the stock exchange. For Polish companies, this means that many will have to prepare ESG reports for the first time, involving the need to adapt internal procedures and policies.

What must be included in an ESG report?

The CSRD Directive introduces an obligation to disclose information in more detail, including the company’s impact on climate change, biodiversity, and social equality. These reports must be prepared in accordance with the new European Sustainability Reporting Standards (ESRS).

Who verifies non-financial reports?

ESG reports will have to be audited by external specialists, increasing their credibility and transparency.

Non-financial ESG reporting – since when?

Large companies will have to prepare ESG reports in accordance with CSRD starting in 2024 (for 2023), while medium-sized companies listed on the stock exchange will have to comply by 2026.

What does ESG reporting mean for companies?

For Polish companies, especially those in the industrial sector, ESG reporting poses many challenges, but also opens up new opportunities. Here are some important changes for entrepreneurs:

• Increased competitiveness: sompanies that prioritize transparency and sustainable development can gain a competitive advantage. Investors and customers increasingly choose partners who care about the environment and society.
• Compliance with regulations: ESG reporting is becoming a legal obligation, so companies must prepare to meet new requirements to avoid penalties and sanctions.
• Building trust: transparent ESG reports build trust among stakeholders such as investors, customers, employees, and local communities. Companies that demonstrate their commitment to sustainable development are perceived as more responsible and trustworthy.
• Improving operational efficiency: actions to increase energy efficiency and reduce emissions can positively impact the company's image and bring real operational savings.
• Reputation risk: companies that fail to comply with new requirements or engage in “greenwashing” activities (pretending to care about the environment) may face criticism from the media, customers, and regulators.

“From a marketing perspective, transparent and comprehensive ESG reports not only confirm that a company operates in accordance with legal requirements, but also show that it is responsible towards the environment, society, and stakeholders. Investors and customers increasingly choose companies that can demonstrate their commitment to sustainable development. ESG reporting is not an unpleasant obligation, but an opportunity to stand out from the competition, build long-term relationships with stakeholders, and strengthen market position.” says Dorota Jeżewska, CMO at DB Energy.

ESG reporting is not only a tool for regulatory compliance but also a chance to build sustainable development and strengthen market position. For industrial companies facing the challenge of adapting to the CSRD Directive's requirements, ESG reports can become the foundation of a sustainable development strategy and a competitive advantage.