Who is ESG reporting for, and what does it involve?

ESG reporting (Environmental, Social, Governance) is a process in which companies present information about their impact on the environment, society, and internal governance mechanisms. The ESG acronym refers to three areas:

• environmental – covers issues related to greenhouse gas emissions, energy consumption, waste management, biodiversity, and the company's impact on the climate;
• social – relates to social responsibility, including human rights, working conditions, diversity, and relations with local communities;
• governance – focuses on governance structures, transparency, ethics, anti-corruption measures, and control mechanisms in the company.

An ESG report is not just a document – it is proof that a company operates in a sustainable, transparent, and responsible manner. For many investors, it is one of the indicators showing how companies care for their business environment.

In the European Union, the obligation to report ESG previously applied only to large companies of particular importance to the economy, which had to meet the requirements of the NFRD (Non-Financial Reporting Directive). However, starting from 2024, under the new CSRD (Corporate Sustainability Reporting Directive), the scope of reporting obligations will be significantly expanded.

According to the new regulations, the obligation to report ESG will cover:

• all large companies that meet at least two of the following three criteria: more than 250 employees, annual turnover above EUR 40 million, balance sheet total above EUR 20 million;
• small and medium-sized enterprises listed on the stock exchange, for which simplified reporting requirements are provided;
• international groups operating within the European Union.

An ESG report should comprehensively present the impact of a company’s operations on the environment, society, and the way the organization is managed. The key elements that should be included in such a report are:

Environmental:

• greenhouse gas emissions (including CO₂ and other harmful gases);
• energy consumption and the company’s strategy for increasing energy efficiency;
• waste management and the way natural resources are handled;
• climate change adaptation strategy.

Social:

• working conditions and equality policies (e.g., regarding diversity of gender, age, origin);
• employee health and safety;
• relations with local communities and social engagement initiatives;
• human rights compliance and ethical standards.

Governance:

• company governance structure, including the composition of the management board and supervisory boards;
• policies on transparency and ethics in the company;
• anti-corruption mechanisms and compliance with legal regulations.

The CSRD directive introduces new ESG reporting rules that significantly expand companies’ disclosure obligations. What changes does this regulation bring?

Who does ESG reporting apply to?

While previously the obligation to report applied only to large companies, it will now also cover medium-sized enterprises and those listed on the stock exchange. For Polish companies, this means that many will have to prepare ESG reports for the first time, requiring adjustments to internal procedures and policies.

What must be included in an ESG report?

The CSRD directive introduces the obligation to disclose more detailed information, including the company’s impact on climate change, biodiversity, and social equality. These reports will have to be prepared in line with the new European Sustainability Reporting Standards (ESRS).

Who verifies non-financial reports?

ESG reports will have to be audited by external specialists, increasing their credibility and transparency.

ESG non-financial reporting – from when?

Large companies will have to prepare ESG reports in accordance with CSRD starting from 2024 (for the year 2023), while medium-sized listed companies – from 2026.

For Polish companies, especially in the industrial sector, ESG reporting brings many challenges but also opens up new opportunities. Here are some important changes for businesses:

• increased competitiveness – companies that prioritize transparency and sustainability can gain a competitive edge. Investors and clients increasingly choose partners who care about the environment and society;
• compliance with regulations – ESG reporting is becoming a legal requirement, so companies must be prepared to meet new requirements to avoid fines and sanctions;
• building trust – transparent ESG reports build trust among stakeholders such as investors, clients, employees, and local communities. Companies that show their commitment to sustainable development are perceived as more responsible and trustworthy;
• improved operational efficiency – actions to increase energy efficiency and reduce emissions can not only positively influence the company’s image but also bring real operational savings;
• reputational risk – companies that fail to adapt to new requirements or engage in “greenwashing” (pretending to care about the environment) may face criticism from the media, clients, and regulators.

ESG reporting is not only a tool for regulatory compliance but also an opportunity to build sustainable development and strengthen market position. For industrial companies facing the challenge of adapting to the CSRD directive requirements, ESG reports can become the foundation of a sustainable development strategy and competitive advantage.