ESG 2024 Report: perspectives, trends and new requirements

Writing an ESG report has become a must for companies, within an ever-changing regulatory framework that requires constant attention to ensure compliance and the opportunity to create strategic value.

An ESG report involves the collection and subsequent reporting of detailed information on a range of non-financial indicators by companies.

The objective of this report is to photograph risks and opportunities related to environmental, social and corporate governance issues (acronym of ESG), in order to produce a communication on the impact that business activities have on people, Common resources, environment and territory.

Since the beginning of 2023, the new CSRD (Corporate Sustainability Reporting Directive) has been in force in Europe and, among other things, it redefines the entities required to prepare the ESG report from 2024.

This has led to an increase in the total number of companies required to draw up a sustainability report, which now stands at almost 50,000 in Europe.

The CSRD Directive is part of the broader European Green Deal, a series of economic and legislative measures to facilitate the green transition and the transition to an economy more in tune with the major issues of the present, more competitive, inclusive and efficient.

From the perspective of ESG reporting, this directive aims to make the indicators and KPIs used for reporting more transparent and up-to-date, in order to allow a clearer and more transparent final communication to stakeholders, investors and institutions.

We will look in more detail in the next paragraphs who will be required to write the ESG report and some of the trends that emerged in 2024 in this area.

ESG 2024 REPORT: WHO WILL DO IT

As a direct result of the entry into force of the European CSRD directive, a larger group of large companies, but also SMEs listed on regulated markets in the European Union, will be required to submit an ESG report on sustainability.

Let’s see it in brief:

• The obligation also extends to non-European companies generating more than EUR 150 million in the EU market;

• All credit and insurance institutions are also required to report;

• In addition, the obligation remains as before for large companies on European territory and generally for listed companies;

• Public entities are also included to the reporting obligation.

The individual subsidiaries of credit and insurance institutions are currently excluded from this obligation, but only if they are included in the parent company’s report, micro-enterprises even if listed on a stock exchange and SMEs not listed on a stock exchange.

This does not mean that these companies cannot decide to voluntarily adapt to the standard and equip themselves to prepare an ESG report.

Let’s see why.

SUSTAINABILITY BALANCE SHEET, TRENDS AND STRATEGIES

For the ESG 2024 report, there will be new measures to consider.

The goal is to make communication as detailed and transparent as possible regarding the impact that the company has throughout its value chain, including for example the territory, the communities in which it lives, the environment and biodiversity, the use of water and energy resources.

But that’s not all, the sustainability report will also contain indications on the working environment, the treatment of employees and in general on corporate culture and policies (anti-corruption, lobbying practices, payment methods etc.).

Over the past decade, there has been a steady and significant increase in the number of companies publishing an ESG report.

This is a direct consequence of the increased demands from stakeholders and investors in terms of greater transparency in the communication of corporate impact and policies.

More and more companies are also choosing to take ESG policies into account within a broader corporate strategy, and voluntarily provide themselves with a sustainability report.

What is the reason for this choice? Having an ESG sustainability report allows a company to be accredited by partners and stakeholders as a transparent reality and committed to reporting and tracking it’s environmental and social responsibility.

In terms of corporate reputation, the sustainability report provides benefits:

• Is an excellent opportunity to convey the company’s commitment and values externally by activating targeted communications;
• In addition, having an ESG report can mean for a company the possibility of accessing European calls, possible reliefs and grants intended for companies that move in a horizon of sustainability and responsibility.

Some of the trends that emerged in 2024 place a strong emphasis on regulation and accountability in the areas of: artificial intelligence, protection of land biodiversity, energy supply from renewable sources, but also equity, human rights and social responsibility.

These are all trends that are being strongly consolidated and should be taken into account for a strategic and comprehensive approach to the ESG 2024 report.

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INDICATORS AND INFORMATION TO BE INCLUDED IN THE ESG 2024 REPORT

As we have anticipated, the ESG report should include as much detailed information as possible regarding various parameters, so that it provides a clear and comprehensive picture of the company’s impact and the compensatory measures implemented or planned to optimize it.

We list below some of the indicators that cannot be missing from a comprehensive sustainability report:

• A list of key sustainability risks (for example, water use, emissions from Scope 1, 2 and 3 etc.);
• ESG policies already adopted, with related targets and monitoring of progress achieved so far;
• Information on the company’s strategy;
• Sustainability goals and associated timelines for achievement;
• Inclusion of key indicators to compare and monitor performance, and evaluate the information provided.

One important factor to consider is the frequent difficulty for companies to obtain and validate all the information necessary to draw up their sustainability report within the established time frame.

This inability can generate consequences in terms of regulatory non-compliance, lead to sanctions or measures, and often have an impact on financial operations and the production chain.

WHAT IS THE CSRD DIRECTIVE?

The entry into force of the Corporate Sustainability Reporting Directive (CSRD) on 1 January 2023, introduced more stringent requirements for companies to prepare their sustainability reports, and brought the number of companies subject to the obligation from about 12,000 to almost 50,000 in the EU.

One of the goals of the CSRD is also to make non-financial reporting a habit for companies, moving towards an adjustment to business prospects that are more aware of their impact, and encouraging good practices in general that are also more adherent to the horizons of the 2030 Agenda.

This new legislation updates the previous legislation, the Non-Financial Reporting Directive or NFRD on disclosure of non-financial information.

Compared to the latter, the CSRD will require greater clarity and descriptiveness in reporting from stakeholders, and consequently greater transparency in communication.

Overall, the direction taken by this regulatory update is clear: more and more companies will increasingly be required to adopt effective measures for monitoring, offsetting and reducing emissions generated throughout the life cycle of their products or services.

There will be a growing need to move towards a responsible, fair and inclusive approach not only to the resources used but also internally in policies directed at employees.

In summary, the direction of institutions and lawmarkers is to increasingly adapt to a horizon where ESG policies will become the norm.