E in ESG - adaptation of companies to climate change

Key information:

• "E" in ESG refers to "Environmental," or environmental aspects. This includes all activities and policies of the organization related to environmental protection.
• ESG reporting makes it easier to raise capital for the company, improve the company's image and increase customer loyalty.
• Today, the environmental ESG indicator is gaining importance in the eyes of investors.
• The ESG report helps investors and stakeholders assess how the company is performing
  with environmental, social and corporate governance issues.
• Implementation of ESG strategies in light of the latest corporate sustainability regulations is crucial.

Details below!

Today, many companies are increasingly faced with ESG reporting obligations. As the global community becomes more aware of the effects of climate change and environmental degradation, companies are under increasing pressure to operate in a more sustainable and responsible manner, including operating with an "E" in ESG.

But what exactly is ESG? ESG is an acronym, standing for Environmental, Social, Governance, and refers to non-financial reporting obligations. In a sustainability report, a company should faithfully and accurately reflect its impact on these three issues. Companies that take ESG factors into account take steps to minimize their negative impact on the environment and society.

What does the "E" in ESG refer to?

E's role in ESG is very broad and encompasses many factors, such as greenhouse gas emissions management, energy efficiency, water management, biodiversity conservation and responsible waste management.

Key areas of environmental protection

According to the ESG reporting guidelines prepared by the Stock Exchange and the European Bank for Reconstruction and Development, environmental issues in reporting for Sustainable Development] of companies primarily concern:

• Climate change mitigation and adaptation,
• energy management,
• pollution and waste,
• water and marine resources,
• Conservation of biodiversity and ecosystems,
• Resource utilization and a circular economy.

Environmental factors (E) refer to how a company uses natural resources and how it affects the environment through its operations.

The above description is only a general outline of the requirements and applies only to the most important areas of reporting this issue.

Why is E in ESG important?

"E" in ESG often attracts the most attention from organizations, and for good reason. This is not only because it directly affects our world, but also because environmental issues pose a serious threat to the society in which the company operates. However, "S" and "G" play an equally important role in the functioning of the organization and should not be overlooked or ignored.

Climate change is one of the most serious issues facing humanity and, due to its potential impact on all aspects of our lives, is widely highlighted when evaluating ESG factors. In addition, the regulatory changes that are needed to combat climate change require organizations to be able to plan for and respond to changes made by governments.

How a company approaches environmental issues such as greenhouse gas emissions, carbon footprint, resource consumption, waste policies and energy needs is analyzed in detail, and these aspects are taken into account in an environmental audit of the organization. In addition, consumers, investors, shareholders and communities are putting pressure on organizations to demonstrate responsible and sustainable practices by disclosing their operations and environmental impacts.

Today, people are more knowledgeable about sustainability and their own impact on the climate than ever before. As a result, society expects companies, organizations and businesses, to be more involved and responsible in environmental issues.

Benefits and challenges of environmental reporting

Benefits of reporting an environmental issue

1. Capital raising

In the world of investors, we can observe trend of interest in ESG reporting. Whether a company has sustainability certifications or regularly publishes corporate social responsibility content on its website can have a very positive impact on the evaluation of an investment. Thus, sustainable companies have easier access to capital and are valued higher than other companies.

2. Improving the company's image

Transparency and transparency in environmental and ESG activities can significantly improve a company's public image and enable it to access previously unavailable opportunities. Such opportunities include, for example, industry events on new sustainable reporting opportunities.

In addition, such an image can attract not only investors, but also customers and employees, for whom corporate social responsibility can be one of the key issues in establishing cooperation.

Interestingly, according to a Manpower Group survey, as many as 84% of Generation Z employees believe that employers should strive for sustainability and take steps to protect the environment.

3. Improve competitiveness and increase customer loyalty

Companies that report their ESG activities can gain a significant competitive advantage. Increased transparency on sustainability is becoming increasingly important to consumers, which can lead to higher customer loyalty and increased market share for the company.

Challenges of environmental reporting

1. Fight against greenwashing

Many companies are trying to find loopholes in existing Sustainability regulations. One of the biggest challenges of modern reporting is precisely the phenomenon of greenwashing.

"Pseudo-environmental marketing, or greenwashing, is the practice of creating a false impression about a product's environmental impact or benefits, which may mislead consumers." - states the European Parliament.

2. Electronic waste

Developments in technology are leading to increased consumption of electronics. Electronic waste, known as e-waste, is becoming a serious problem because it contains toxic substances that can contaminate soil and groundwater. The electronics industry is currently facing the challenge of effectively managing this waste.

3. Costs

Preparing for environmental reporting can be challenging, especially for small and medium-sized companies. You need to gather the right documentation and set appropriate targets. Creating a strategy, regarding the "E" in ESG, often requires the support of professionals to help assess the company's environmental impact and also to identify key areas for improvement, develop appropriate metrics and indicators, and integrate these activities into the company's overall business strategy.

Does the environment matter to investors?

Investors are increasingly considering ESG (Environmental, Social, Governance) factors in their investment decisions. An environmentally conscious approach can improve a company's reputation, attract more informed investors, and reduce regulatory risks and potential financial penalties.

A company's ESG report should include detailed information on its environmental, social responsibility and corporate governance activities and performance.

Even more seriousness is added to this issue CSRD directive introduced by the European Union (Corporate Sustainability Reporting Directive).

Why is it important to make Sustainability changes at your company?

The importance of ESG in the context of social responsibility and sustainability lies in supporting activities that benefit both the company and its environment. Companies that integrate ESG into their strategy often report better financial performance and show greater resilience to market changes. For example, a McKinsey analysis indicates that companies with low-carbon product portfolios or high exposure to markets that support sustainability had higher shareholder returns.

But what is E's role in the ESG?

"E" in ESG refers to the actions and implementation of a company's strategy to minimize its environmental impact. It includes managing greenhouse gas emissions, improving energy efficiency, sustainable use of water resources, responsible waste management and biodiversity conservation.

Reporting activities are key to reducing negative business impact on the environment and are increasingly valued by investors, consumers and regulators who expect companies to be transparent and committed to Sustainability.

ConQuest Consulting offers assistance in developing a strategy that will not only increase the efficiency of your company, but also contribute to environmental protection. Contact us today and begin the transformation that will bring success to your business and to your environment and community.