Welcome to the world of sustainability, accountability, and risk management where every single decision matters for the overall performance of the business.

This is where the ESG report comes into play. The term ESG stands for Environmental, Social, and Governance – those are the three key areas of risk when it comes to managing your business. ESG reporting constitutes the gathering and disclosing of information through a set of procedures, organizational policies, guidelines, standards etc. It improves the progress and image of the company by managing the risks, boosting operational performance, providing companies with new business and investment opportunities, better reputation, access to capital and financing.

In an effort to address the new requirements for businesses and the current sustainability challenges, the European Commission has taken upon itself to implement new legislation which will serve to make companies more transparent helping investors, current and prospective customers creditors, employees etc. to evaluate not only the risks but also the opportunities for investment/success of the company.

The main legislative risk management innovation has been brought by the Directive 2014/95/UE (NFRD – Non-Financial Reporting Directive) and the Directive 2022/2464/EU (CSRD – Corporate Sustainability Reporting Directive). The NFRD was the European Commission’s answer to the growing demand for non-financial disclosure regulations. The large public entities that are obliged to comply to the requirements of the NFRD are those with more than 500 employees with either total assets of more than 20 mil EURO or a turnover of more than 40 mil EURO. They are obliged to provide information regarding their operations financial and non-financial, as well as information on any third parties that are part of their supply chain.

The CSRD expands the scope of the NFRD’s reporting standards. With the new changes, the reporting is required to be more detailed with additional topics and mandatory auditing of the reported information. The changes also touch upon on the entities that are required to disclose their information – large companies and companies listed on the EU regulated markets. In order to be required to disclose their information the entities must meet two of the three following criteria – have more than 250 employees, more than 43 mil in assets, turnover of more than 50 million EUR.