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Consulting for ESG - sustainability report
ESG, i.e. environmental (E), social (S) and governance (G), these 3 pillars show how sustainably a company operates in these three dimensions, and in these companies are expected to report, which is mostly about the environment of the company's operations, tries to monitor its impact on society and identify the risks related to the operation. The ESG rating provides information on the company's sustainability performance and potential risks.
During the ESG consultation, we examine the current and expected legal regulations or standards, other regulations, and recommendations that apply to the given company, and create the sustainability report. The preparation of an ESG report is mandatory for companies and organizations that fall under the scope of the CSRD (Corporate Sustainability Reporting Directive, DIRECTIVE (EU) 2022/2464 of the European Parliament and Council) or for which transparent communication of their ESG performance is important to investors., customers and the public.
The benefits of ESG investments include long-term stability, reducing risk, improving business performance, stimulating innovation and promoting positive social impacts. Financial sector players are also seeking to align their investments with ESG considerations, with large listed companies receiving ESG ratings from independent rating agencies on the sustainability of their operations.
In Hungary, the Budapest Stock Exchange (BSE) recommends in its ESG guidelines that all issuers publish sustainability reports on an annual basis starting in 2023 (for the year 2022).
The Corporate Sustainability Reporting Directive (CSRD) adopted by the European Commission was entered into force in 2024 and will be progressively extended to all listed companies.
The ESG indicator framework is composed of 3 pillars, which mainly aim to capture the impact of companies' operations on the environment and society, and to identify the risks associated with their operations.
ESG data can be sourced from company reports and an increasing number of companies already publish sustainability reports, or from other data examined by external rating agencies to develop a company's rating.
The 3 pillars of ESG
Environmental (E) pillar:
- resource use and efficiency,
- emissions such as greenhouse gases, pollution of air, water, soil, and the built environment,
- climate strategy
- energy efficiency, carbon management,
- resource use and efficiency: how a company ensures that raw materials are recycled back into the economy,
- how carefully a company manages water resources,
- land use issues: deforestation and biodiversity,
- recycling and waste management,
- the positive environmental impact that business can have, which can even provide a long-term competitive advantage.
Social (S) pillar:
- employee safety: how the company ensures the development, training, education, development and satisfaction of its employees,
- practices on personnel issues,
- diversity and equal opportunities,
- human rights risks,
- safety and quality of companies' products,
- working conditions, welfare, health and safety at work,
- issues related to unethical supplier behaviour
Governance (G) pillar:
- shareholder rights, board diversity, board compensation, and how these are aligned with sustainability goals,
- business ethics, compliance,
- anti-competitive behaviour, bribery, corruption, tax evasion,
- transparency,
- compliance with standards and regulations,
- complaint handling, other reporting options
The indicators we use to compare companies differ from industry to industry, so ESG indicators are best interpreted within industries, and within those industries, we should select companies with high scores.
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