Below mentioned is a summary of the presentation delivered by Gerard Higgins, CEO Antaris, last week:
The Environmental, Social & Governance (ESG) presentation addressed the following:
- What ESG is
- Why it is very important
- Why a paradigm shift is on the way.
Summary below –
- ESG or Environment Social and Governance covers a wide range of issues from climate change to slavery, and from management to diversity.
- ESG is about sustainable development. It’s about meeting our needs today without jeopardising the needs of future generations. It’s about taking a wider view of going beyond short-term shareholder capitalism to work towards a more just and fair society.
- These are the 17 Sustainable development goals adopted in 2015 by the UN and the EU which encompass environment, social, and governance.
- They are often used by companies to frame their sustainability.
- The World Economic Forum global risks report 2023 shows that Climate, Extreme Weather, and Biodiversity are the top risks for the next decade.
- Climate Change has gone from being a distant potential risk to being a manifest reality and the effects are getting progressively worse.
- The world we grew up in is gone and even with immediate massive reductions in GHG emissions, we will still have a much warmer future.
- Biodiversity is also a major problem and has impacts on global health.
- We are currently living in the 6th mass extinction event.
- The WEF global risks report 2022 shows how the environmental risks from climate, weather, and biodiversity feed into all kinds of social, geopolitical, and financial risks, and therefore cannot be ignored.
- ESG ratings have until now been quite opaque in how they operate.
- Right now, we are on the cusp of a massive paradigm shift.
- The Corporate Sustainability Reporting Directive (CSRD) is the successor to the Non-Financial Reporting Directive.
- It will apply to firms with more than 250 employees and (either) more than 20 million euros in assets or 40 million euros in turnover from the financial year 2025.
- It brings a new level of rigor to sustainability and ESG.
- For the first time, ESG reporting will become widespread and mandatory.
- There are 2 overarching standards, General requirements, and General disclosures.
- There are 5 environmental standards E1-5 covering the areas set out in the EU taxonomy, that is Climate, Water, Pollution, Biodiversity, and Circular Economy.
- There are 4 social standards, S1-4. These cover, S1, Own workforce, S2, Workers in the value chain, S3, Affected communities and S4 Consumers and end users.
- There is one governance standard G1 Business Conduct.
- The implementing company has to produce a new report each year but needs to take a double materiality approach to understand which of the ten sectoral standards (5Gs, 4Ss and 1 G) are relevant to it.
- Double materiality means that companies need to consider both the impact of their own activities on the environment and society, as well as the impact of the environment and society on their business. It’s like thinking about how your actions affect your surroundings, but also how your surroundings affect you. So, companies need to report not only on what they’re doing to be sustainable but also on how sustainability issues might affect their business in the future.
- All the reporting will have to be marked up in XHTML or XBRL and submitted to a central hub. This means all the data can be viewed and compared. This means it’s useful data, data upon which finance and investment decisions can be based.
- These are some Mandatory Disclosure requirements (DR). For climate, you will have to report on your transition plan, and disclose your energy consumption and your emissions Scopes 1,2, and 3
- This is a huge difference from the voluntary reporting of the past.
- Many elements align with many existing reporting standards such as GRI, ISSB, etc.
Therefore, companies need to start by getting the co-operation of their board and employees, conduct a baseline of the information they already have, and do a gap analysis to see where they have gaps and devise an action plan to close the gap.