.png)
%20(1)%20(1)%20(1).png)
What is ESG?
A Guide to ESG Reporting
ESG stands for environmental, social, and governance practices – key elements in any modern business strategy. This guide helps you navigate the most essential topics and concepts within ESG, so you can understand their significance and role in responsible business practices. Explore the 8 important topics below to gain deeper insights into ESG.
ESG stands for Environmental, Social, and Governance, referring to the three main areas used to measure a company’s sustainability and social responsibility. ESG criteria help companies assess their environmental impact, social responsibility, and governance practices. Environmental covers topics such as CO2 emissions, resource consumption, and waste management. Social focuses on working conditions, employee rights, diversity, and community engagement. Governance includes a company’s ethical practices, transparency, and board structure. ESG is increasingly used by investors, customers, and authorities as a benchmark for a company’s sustainability and ability to create long-term value.
The requirements for ESG reporting will impact a wide range of companies, especially as the EU tightens regulations for sustainability reporting. The new requirements will initially apply to large publicly listed companies, financial institutions, and companies with over 250 employees, a net turnover exceeding 40 million euros, or a total balance sheet of over 20 million euros. Implementation will be gradual, with the first requirements coming into effect in 2024 for reports covering the fiscal year 2023. Later, the requirements will expand to include smaller companies, meaning that more companies will need to be prepared to report their ESG performance in the coming years.
Even companies not directly covered by mandatory requirements will likely be affected. Many large companies will require ESG data from their suppliers and partners to fulfill their own reporting obligations. This means that the demand for ESG data will extend throughout the supply chain, and smaller companies may feel pressure from customers and business partners to provide information about their sustainability performance. Therefore, it’s essential for all companies to start understanding and preparing for ESG reporting, as it could become a market expectation and a competitive advantage in the future.
EFRAG (European Financial Reporting Advisory Group) is a European organization that advises the EU Commission on financial reporting. In relation to ESG, EFRAG plays a central role by developing the standards companies must follow when reporting on their sustainability efforts. EFRAG works closely with stakeholders from the business community, civil society, and government authorities to ensure that the reporting standards are relevant, practical, and of high quality. EFRAG’s work helps ensure a harmonized approach to ESG reporting across Europe, making it easier for companies to compare their performance.
EFRAG ESRS VSME (European Sustainability Reporting Standards for Very Small and Medium Enterprises) is a specific reporting standard developed by EFRAG to meet the needs of small and medium-sized enterprises. This standard allows SMEs to report their ESG performance in a simpler and more tailored manner without compromising the quality of the reporting. EFRAG ESRS VSME is designed to be less complex and resource-intensive, making it easier for smaller companies to meet reporting requirements without being overwhelmed by the administrative burdens typically associated with sustainability reporting.
EFRAG ESRS (European Sustainability Reporting Standards) is the set of standards developed by EFRAG to regulate how companies in the EU should report on their sustainability performance. These standards cover a wide range of ESG topics, including environmental impacts, social conditions, and governance practices. EFRAG ESRS aims to create a harmonized and transparent framework for ESG reporting in Europe, enabling companies to provide consistent and comparable information to investors, stakeholders, and authorities. The standards are designed to help companies meet the new EU requirements and support the green transition by promoting responsible business practices.
The Climate Compass is a tool developed by the Danish Business Authority that helps companies measure and report their CO2 emissions. It offers standardized methods for calculating a company's climate impact based on various activities such as energy consumption, transportation, and production. In esgBRICKS, we use all the equivalents from the Climate Compass in our automatic CO2 calculator, making it easy for companies to obtain precise and reliable calculations that adhere to official guidelines. This supports ESG reporting efforts by providing trustworthy data and calculation methods that align with international standards. The Climate Compass is particularly useful for companies looking to start or improve their sustainability reporting with valid data.
A double materiality assessment is a method used to identify and evaluate which environmental, social, and governance (ESG) issues are significant for a company. According to EFRAG's definition, this analysis includes two perspectives:
Impact materiality: This part of the analysis examines how the company's activities affect the environment and society. It focuses on understanding the company's influence on external factors such as climate change, resource consumption, and social conditions.
Financial materiality: This part assesses how external ESG factors impact the company’s financial performance. This may include risks and opportunities arising from climate change, regulations, or changes in consumer behavior.
Thus, a double materiality assessment ensures that the reporting includes both the impacts the company has on the external environment and how the external environment affects the company. This provides a comprehensive view of the significant ESG issues that can influence both the company’s sustainability performance and its financial results.
Key figures are a collection of measurable indicators used to evaluate and report on companies' performance in specific areas, such as financial health, operational efficiency, and sustainability. In the context of sustainability reporting, key figures typically refer to ESG key figures, which focus on the environmental (Environment), social (Social), and governance (Governance) aspects of a company's operations.
ESG key figures can cover a wide range of indicators, such as CO2 emissions, energy consumption, working conditions, workforce diversity, board composition, and the company's ethical guidelines. These key figures are important because they help quantify and communicate companies' sustainability performance to stakeholders such as investors, customers, and authorities.
"Sustainability requirements will soon impact SMEs – and most are not ready"
Søren V. Pedersen, CEO, Beierholm
Read more about how Danish small and medium-sized enterprises are impacted by ESG reporting requirements, how SMEs can prepare and not only contribute to a more sustainable future but also strengthen their own position in the market – we’ve gathered everything on one page.
Capana has, over the years, helped:
esgBRICKS
– a part of Capana
esgBRICKS is an ESG reporting platform developed by Capana, which has over 20 years of experience in building reporting solutions. Capana is one of Scandinavia’s most experienced Qlik-BI firms and currently provides business intelligence (BI) solutions for finance departments, sales, procurement, and production in companies of all sizes. With esgBRICKS, your company gains a reliable and efficient ESG platform created by experts in BI.
