Will ESG and sustainability reporting motivate business entities to realistically accelerate green business transformation and reduce the scale of greenwashing used by many companies and enterprises?

In the past, only a few companies and enterprises have, on their own initiative, applied non-mandatory enhanced non-financial reporting, including reporting on issues of meeting sustainability goals, green business transformation, environmental and climate social responsibility, creation and implementation of new green investments and eco-innovations, adding sustainability and green business strategies to the company's mission, conducting business in accordance with the principles of green economics and closed-loop economics, including, among others. Among other things, significantly decarbonizing production processes, basing production processes or the provision of services on energy from renewable and zero-emission energy sources, increasing the scale of recycling and reducing the level of environmental pollution from the manufacturing processes of business entities, organizing and financing pro-environmental and pro-climate projects such as planning and implementing reforestation programs carried out in post-industrially degraded areas, etc. This was usually associated with a situation in which the issues of sustainable development goals and the green economy were, on their own initiative, integrated into the strategy of their business, inclusion in the company's mission and strategic directions of business development within the applied business model.

However, in connection with the growing importance of the issue of achieving the objectives of sustainable development and green transformation of the economy, the increase in the level of general social pro-climate and pro-environmental awareness related to the issue of the accelerating process of global warming, the inclusion of the issue of carbon intensity with the implementation of the objectives of sustainable development and conducting business in accordance with the principles of green economics, the need to reduce the scale of greenwashing practices increasingly used by many companies and enterprises, the linking of the issue of carbon intensity with the system of fees for CO2 emissions being developed in the European Union, etc., the need for legal normalization has emerged. the need for legal normalization of the issue of expanded, full non-financial reporting including ESG reporting has emerged.

The essence of ESG (environmental, social and governance) reporting is to take into account the sphere of social, environmental and managerial responsibility of business as part of full, extended non-financial reporting. In view of the above, ESG reporting has recently become one of the key issues that determine the reputation but also the competitiveness of companies in the market. Research shows that business entities that undertake and develop pro-social, pro-environmental, pro-climate, etc. non-financial ESG reporting projects achieve better financial performance. The issue of improved financial performance is derived from the improvement of image, the increase in the scale of the company's brand recognition, the growth of the company's reputation with customers and investors. Improving the level of competitiveness of the company achieved through ESG measures is a process that requires the implementation of a number of measures in many spheres of business operation. Therefore, business entities should increase the scale of taking into account the sphere of social, environmental and managerial responsibility of business as part of full, extended non-financial reporting. Accordingly, it is necessary to take into account the implementation of social, environmental and risk management objectives in the context of business operations as part of responsible decision-making. In the sphere of corporate social responsibility, companies and enterprises should increase the scale of creating good working conditions, increasing diversity and equality in the workplace and engaging in social activities. All these aspects should positively affect the perception of the company by customers and employees, improve the reputation and image of the business entity which should then positively affect the level of satisfaction and motivation among employees.

The issue of environmental protection, including the reduction of greenhouse gas emissions, reducing the level of environmental pollutants is also a particularly important aspect of expanded non-financial ESG reporting, which has a significant impact on the company's image and financial performance. Planning, improving and implementing measures to reduce greenhouse gas emissions, increase energy efficiency, reduce the scale of waste generation, increase the scale of recycling, reduce water consumption in manufacturing processes, apply the green, sustainable and closed-loop economics model are important elements of environmental, pro-environmental and pro-climate measures. Companies and enterprises that undertake and develop such pro-environmental and pro-climate projects gain recognition among customers, business counterparties and investors, which should also result in improved financial performance. Customers, business counterparties and investors noticing the pro-environmental and pro-climate measures taken by companies and enterprises notice that in this way certain business entities are also becoming fully pro-social in real terms.

And in the area of risk management, expanded non-financial ESG-sensitive reporting can help companies minimize the costs associated with potential risks associated with increasingly pro-environmental and pro-climate business activities. This can also reduce the scale of scandals involving ethical issues and increase the likelihood of avoiding risks associated with corrupt practices. The improvement of risk management processes increases the resilience of companies and enterprises to the negative factors of the external economic environment, including the impact of economic crises, economic recessions on the operation of the company's business, contributes to the precise estimation of the level of risk, the definition of risks and the preparation of appropriate safety reserves, the development of early warning systems for threats and development opportunities of business entities, motivates the creation of emergency systems, crisis management, etc. The effect of such activities carried out in the creation and improvement of risk management systems should also result in improved financial performance of companies, enterprises and other business entities. In addition to having a positive impact on a company's image, ESG can also help increase competitiveness in the market. ESG-related activities can generate savings for the company, improve the efficiency of business processes and increase customer and employee loyalty.

According to regulations adopted in the European Union, from 2024, full non-financial reporting will apply to large public interest companies already covered by the NFRD and with more than 500 employees. From 2025, full non-financial reporting will apply to companies with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets. And from 2026, full non-financial reporting will apply to companies in the SME sector and other listed companies with more than 10 employees.

In view of the above, I address the following question to the esteemed community of scientists and researchers:

Will ESG and sustainability reporting motivate business entities to really accelerate green business transformation and reduce the scale of greenwashing practiced by many companies and enterprises?

Will ESG reporting motivate business entities to really accelerate green business transformation?

And what is your opinion on this topic?

What is your opinion on this issue?

Please answer,

I invite everyone to join the discussion,

Thank you very much,

Best regards,

Dariusz Prokopowicz

The above text is entirely my own work written by me on the basis of my research.

In writing this text I did not use other sources or automatic text generation systems.

Copyright by Dariusz Prokopowicz