Soon, the first companies will be required to submit an ESG report, in line with the new standards introduced by the European Commission. What is ESG reporting? How does it differ from previous voluntary non-financial disclosures? We encourage you to read on!
In this article, you will learn:
What is ESG Reporting?
ESG reporting (Environmental, Social, Governance) refers to the practice of companies disclosing information about their actions and performance in three key areas: environment (E), society (S), and corporate governance (G).
In practice, this means that companies report their actions aimed at protecting the environment, ensuring the rights of employees and communities, as well as their management principles and business ethics.
It can be said that an ESG report is a company’s statement about its sustainability efforts, intended for stakeholders such as investors, clients, employees, local communities, and financial and insurance institutions. The information in such a document allows third parties to assess a company’s impact on the environment and society and also shows how the company manages risks and operations.
Why is ESG Reporting important?
ESG reporting is important for several reasons. First, it helps companies identify and manage risks related to their actions in environmental, social, and governance areas. This allows them to avoid potential issues and shape sustainable business strategies.
Second, transparency in ESG matters can attract investors who are increasingly focused on sustainable and responsible investments.
Third, companies that report on ESG gain trust from clients, employees, and business partners, which leads to better relationships and a positive brand image.
Finally, ESG reporting is increasingly required by regulations at both national and international levels, making it an essential element for running a modern business.
The CSRD Directive and ESG Reporting
Starting in 2024, voluntary non-financial reporting standards were replaced by the mandatory ESRS – European Sustainability Reporting Standards. This change, introduced by the European Commission, aims to improve the quality of information disclosed by companies and make it possible to compare the information between different entities.
Additionally, the CSRD directive, published in 2022, introduces the obligation to disclose detailed non-financial information and expands the scope of entities that will be required to submit an ESG report.
When does ESG Reporting become mandatory? Deadlines and requirements
Initially, the largest entities will be required to comply, such as large public interest entities with more than 500 employees and meeting at least one of two criteria: annual net revenues exceeding 40 million euros or assets exceeding 20 million euros. These entities will submit a report summarizing the current year in 2025, as the obligation will take effect after December 31, 2024.
From 2025, the CSRD directive will be mandatory for all large entities employing more than 250 people, with annual revenue exceeding 50 million euros and assets exceeding 25 million euros. The first report must be submitted in 2026.
From 2026, the CSRD directive will also apply to medium and small companies employing more than 10 people, with annual revenue of 700 thousand euros and assets totaling 350 thousand euros.
From 2027, ESG reporting will also be mandatory for selected companies based outside the EU that have subsidiaries or branches in Poland and achieve annual revenues above 150 million euros within the EU. In this case, the first ESG report must be submitted in 2028.
How to prepare your company for ESG Reporting? Steps for implementation
The new ESG reporting obligation means that companies need to properly prepare to submit their reports on time and in accordance with the standards. To do this, companies need to identify the scope of reporting and develop an effective system responsible for gathering and combining data related to the company’s ESG goals.
The first step in preparing the company for the new obligations is to thoroughly understand the requirements and regulations regarding ESG reporting. A good practice is to designate an ESG team that will be responsible for data collection, analysis, and report preparation. The team should include representatives from different departments of the company, such as HR, finance, risk management, and sustainability.
Next, it is necessary to conduct an analysis and identify the most important ESG issues for the company. To do this, it is crucial to determine which environmental, social, and governance aspects are key for the company’s stakeholders, such as customers, employees, investors, and local communities.
The next step is gathering appropriate data and indicators related to the company’s ESG actions. These data should be accurate, measurable, and reliable. A monitoring and reporting system should also be established to enable regular updates.
Based on the identified ESG issues and collected data, the company should set goals and strategies for sustainable development. These goals should be measurable, realistic, and aligned with the company’s long-term plans.
Developing the ESG report is the next step. The report should be transparent, comply with the accepted reporting standards, and include all essential information regarding the company’s ESG activities. It is also important to ensure that the report will be accessible to all stakeholders.
After preparing the report, it is essential to effectively communicate the ESG results and actions to stakeholders. Companies can do this by publishing the report on their website, organizing informational meetings, or using social media.
ESG reporting is a continuous process. Companies should regularly monitor their activities, update data and goals, and introduce improvements based on feedback from stakeholders. Continuous improvement allows for better performance in terms of sustainable development.
Which Digital Tools Support ESG Reporting?
In the context of increasing ESG reporting requirements, digital tools can significantly facilitate the collection, analysis, and presentation of data for companies.
One of the key features of the V-Desk system is advanced data management systems that automate reporting processes and enhance the accuracy and transparency of information.
Clients who request such a solution receive customized data collection and reporting capabilities tailored to the specifics of the business.
For one of our clients, a solution has been implemented in the V-Desk system where the list of all contractors is automatically retrieved, identifying those subject to ESG reporting by their NIP number. For such contractors, with the appropriate ESG tag, document editing screens have been extended with additional columns, such as type, unit, and city. When one of these fields is filled, the remaining fields become mandatory, ensuring data consistency.
Additionally, we have developed a special report in the form of a view embedded in the context menu, which displays all occurrences of ESG contractors with the relevant columns. This tool allows filtering by various criteria, such as dates, enabling the generation of monthly, quarterly, semi-annual, and annual reports. The standard report export function makes it easy to share data with stakeholders.
Using such digital tools not only helps ensure compliance with new regulations but also improves business process efficiency, increases transparency, and helps companies better manage their sustainable development commitments. The V-Desk system is exceptionally flexible, and we can easily modify reports to support companies in ESG reporting. Document processing processes provide a rich source of data and information, ready for aggregation and reporting for any purpose, including sustainable development.
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