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The rise of ESG regulations
In recent years, Environmental, Social, and Governance (ESG) regulations have rapidly evolved, forcing companies to adapt or face penalties. While large corporations are often more familiar with these regulations, mid-sized companies (with between 100 and 1,000 employees) are increasingly being affected.
From standards like the Global Reporting Initiative (GRI) to the recent EU Corporate Sustainability Reporting Directive (CSRD), companies must now comply with more detailed reporting on their environmental, social, and governance impact. The challenge for mid-sized companies is not only understanding these regulations but implementing them effectively without diverting attention from their business goals.
In this article, we’ll break down the key ESG regulations affecting your business in 2024, explain the most relevant reporting frameworks, and offer recommendations to comply without complications.
Key ESG regulatory frameworks and their implications
1. Corporate Sustainability Reporting Directive (CSRD)
The CSRD is one of the most significant regulations impacting European companies in 2024. Introduced by the European Union, this directive replaces the previous Non-Financial Reporting Directive (NFRD) and significantly expands the number of companies required to report on their environmental and social impacts.
Who is affected?
The CSRD broadens its scope to all large companies but will also include mid-sized publicly traded companies. If your company has over 250 employees, revenues exceeding 40 million euros, or a balance sheet greater than 20 million euros, you’ll need to comply with this regulation.
What does it entail?
Under the CSRD, companies must report on topics like the environmental impact of their operations, labor practices, workforce diversity, and how they manage climate-related risks. Additionally, the standard requires that the information be audited by third parties to ensure transparency and data reliability.
2. Global Reporting Initiative (GRI): The most widely used reporting framework
The GRI is one of the most commonly used reporting frameworks worldwide, providing a standard for companies to report on their environmental, social, and economic impacts. While not mandatory, many companies adopt this framework to meet the expectations of their stakeholders.
Why use GRI?
The GRI offers a set of specific indicators that help companies measure and communicate their impact in key areas such as natural resource usage, carbon emissions, employee well-being, and business ethics. Adopting this framework not only helps meet regulatory requirements but also enhances the company’s reputation with customers, investors, and employees.
3. Task Force on Climate-Related Financial Disclosures (TCFD)
The TCFD is a global framework designed to help companies report on climate-related financial risks. While not mandatory in all countries, its adoption is growing, especially in sectors such as finance, energy, and manufacturing.
Who should follow TCFD?
TCFD is particularly relevant for companies operating in sectors with high climate risks or those seeking funding from international investors. Increasingly, institutional investors are expecting companies to report how they manage risks and opportunities related to climate change.
The challenge of complying with multiple frameworks: how to choose the right one?
With so many regulations and reporting frameworks, many companies wonder: Where do we start? The key is to identify which framework is most relevant based on your company’s size, sector, and market.
For mid-sized companies, the most commonly used frameworks are likely to be a combination of CSRD and GRI, especially if they operate in Europe or are exposed to the European market. These regulations provide a clear structure to meet regulatory and stakeholder expectations. However, if your company is exposed to climate risks, considering the adoption of TCFD may be a smart long-term strategy.
How can sustainability Software help?
One of the biggest challenges in complying with ESG regulations is collecting, analyzing, and reporting the necessary data. This is where technology tools, such as sustainability software, play a crucial role. These solutions automate the process of tracking indicators, consolidate information in one place, and generate standardized reports, making compliance easier without diverting internal resources.
A PwC study shows that companies using dedicated ESG reporting software see a 30% reduction in the time spent on these processes and achieve greater accuracy in data presentation.
Adapting to survive and thrive in 2024
2024 brings significant changes in ESG regulations that will affect many mid-sized companies. Those that fail to prepare risk facing penalties, but beyond that, they will miss the opportunity to position themselves as responsible leaders in their industries.
Complying with regulations is not just an obligation; it’s an opportunity to demonstrate transparency, build stakeholder trust, and improve business resilience in the long term. As we’ve seen, frameworks like CSRD, GRI, and TCFD provide the necessary foundations for companies to properly report their ESG impact and improve their market positioning.
At The Good Goal, we believe that early and proactive adoption of these regulations is key to long-term success. It’s not just about compliance, but about integrating sustainability into the DNA of your company. If your organization is looking to adapt to these changes, we’re here to help.
Are you ready to comply with ESG regulations in 2024? Request a demo to discover how we can help and start preparing your company for a sustainable future.