Over the past decades, the immense industrial development, modernization, and corporate competition have entirely diverted our attention from our environment and its protection. Sustainability is not just a catchy slogan; it represents a good investment, and those who act in time can reap significant benefits. In 2024, this topic is no longer just a sticker on the wall; action must be taken, both at the small and large enterprise levels, to ensure companies can continue operating at the usual pace in the coming decades, but in a less environmentally damaging way.
In December 2023, the National Assembly adopted the law on the obligation of sustainability reporting and sustainability due diligence, whose provisions establishing the sustainability-targeted due diligence, reporting, and disclosure obligations for affected companies come into effect on January 1, 2024.
Let's see what those affected can start with on this topic. How are ESG scores calculated, and what constitutes the scalable criteria system for a given company or country?
What the letters mean:
E = Environmental
S = Social
G = Governance
How ESG scores are calculated:
The three letters represent three areas we previously explained. Separate percentage scores are formed for companies based on factors related to the environment (E), society (S), and governance (G), examined from a sustainability perspective. The percentages obtained based on the three criteria groups are summed to derive a company's primary ESG score. Depending on the industry in which a company operates, the scores of the three factors are considered with different weightings, and this adjustment results in the final, measurable ESG score.
These three areas are hard to quantify and even harder to measure and compare with other companies. However, once an effective criteria system is established, ESG scores are not as daunting as we thought when the concept first entered public consciousness.
Let's break down the tasks based on the three areas, so from SMEs to large corporations, without using numbers and percentages, what tasks await those involved to achieve ESG compliance:
Environmental (E) tasks:
Measuring and reducing environmental impacts:
Reducing CO2 emissions
Increasing energy efficiency
Optimizing water usage
Reducing and recycling waste
Sustainable supply chain:
Using eco-friendly raw materials
Selecting suppliers based on sustainability criteria
Using renewable energy sources
Biodiversity and nature conservation:
Projects for preserving biological diversity
Responsible land use and habitat protection
Social (S) tasks:
Employee rights and well-being
Diversity and inclusion
Community responsibility
Consumer satisfaction and safety
Governance (G) tasks:
Transparency and reporting:
Preparing and publishing regular ESG reports
Ensuring transparency of financial and non-financial information
Ethical business practices:
Supporting business ethics and compliance
Board responsibility:
Integrating ESG criteria into the corporate governance structure
Defining the responsibilities of the board and management for ESG performance
Risk management:
Identifying and managing ESG risks
Incorporating sustainability risks into business strategic plans
In addition to the mentioned "tasks," numerous other duties and challenges are present, varying for each company and differently affecting the respective industries. These points may aid in a clearer understanding of the topic, but it is crucial to have an expert or even a team guiding our path for effective operation and change.
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