What is ESG and how will it affect your business?

ESG is an acronym for Environmental, Social and Governance (ESG) criteria that are used to assess a company's sustainability and social impact. These criteria are becoming increasingly important in investment and business as a whole.

Environmental criteria focus on a company's impact on the environment, including how it manages its waste, its impact on climate change, its use of natural resources and the protection of biodiversity.

Social criteria relate to the company's interaction with its employees, suppliers, customers and local communities. This includes, for example, working conditions, health and safety in the workplace, treatment of customers and relations with society.

Governance criteria assess how a company is managed, including transparency of decision-making processes, ethical behaviour, corporate structure and compliance with laws and regulations.

We recognise that companies' approach to environmental, social and governance (ESG) issues is changing. This trend is not so much the result of increasing awareness of the importance of sustainability, but rather the result of new legal requirements that come with the new EU Corporate Sustainability Directive (CSRD).

Under the new CSRD, the largest Czech companies will be required to report non-financial reports from 2024, while companies with more than 250 employees will have to report from 2025. Small and medium-sized enterprises listed on the stock exchange will be obliged to report from 2027, with a possible postponement until 2028.

The CSRD Directive represents a significant shift in corporate environmental, social and corporate governance reporting. While some large companies have long reported non-financial data, the CSRD now makes this mandatory for all large companies and, from 2027, for listed SMEs.

Implementing ESG into corporate strategy and reporting can bring several benefits, including improved market positioning, building investor and customer confidence and potentially improved financial performance.

At our law firm, we pay close attention to ESG criteria. We recognise their growing importance not only in business, but also in the wider social and environmental context. We monitor the latest developments and trends in ESG and will keep you informed.