Recently, there has been increasing discussion about ESG, but what does it actually mean for companies and entrepreneurs? As explained by Marija Puljo Tadić, president of the International Institute for Climate Action, at the Lider conference on Sustainable Finance, sustainable financing takes into account environmental (environmental), social (social), and governance (governance) factors when making investment decisions.
Currently, ESG reports contain two environmental criteria, mitigation and adaptation to climate change, while from 2023, reports will include four more – sustainable use and protection of water and marine resources, transition to a circular economy, prevention and control of pollution, and protection and restoration of biodiversity and ecosystems. She mentioned two principles of ESG, ethics and transparency.
– If you report correctly, then we all know to what point we have come in achieving the goals of reducing harmful emissions by 55 percent by 2030 and complete neutrality by 2050. If you provide false data, we will not know that – emphasized Puljo Tadić, adding that the Croatian National Bank, the Croatian Financial Services Supervisory Agency, and the Ministry of Finance will be the regulatory bodies that will control the reports and assess whether they are well composed.
—
—
She also mentioned the so-called greenwashing, the false representation of activities and products as green, and pointed out that this phenomenon is widespread and possible precisely because there have not been any KPIs and taxonomy until now.
Ksenija Petričević, director of the capital market supervision sector at Hanfa, presented Hanfa’s guidelines for the preparation of ESG reports. Recommendations for issuers who are obligated to publicly disclose non-financial reports and those who voluntarily publicly disclose non-financial reports in 2021, until the delegated regulations of the Taxonomy Regulation come into force, are:
—
- that in their annual report, in the part of the annual report (management report) within the non-financial report, they include disclosures of indicators in non-financial reports according to Article 8 of the Regulation already during 2021 with data for the previous year
- that public disclosure of data be simultaneous with the publication of the annual report according to the Capital Market Act (April 30), and no later than in accordance with the deadline according to the Accounting Act (June 30; September 30 consolidated)
- if the issuer publishes non-financial information in a separate non-financial report, the disclosures of indicators can be published in that separate report in accordance with the rules of the Capital Market Act on public disclosure of prescribed information (publication via media, websites of the Zagreb Stock Exchange, and the official register of prescribed information)
- that when selecting the Standard for non-financial reporting and the content of reporting, they take into account the ESG factors that SFDR obligors will have to analyze, i.e., consider when making investment decisions
—
– We recommend that when publishing indicators, issuers be guided by the obligations of financial companies that are their potential investors. We also recommend that companies, at least those listed on the Zagreb Stock Exchange, try to publish reports somewhat earlier than the set deadline of April 30 of the following year – added Petričević.
—
—
The biggest challenge for companies will be the implementation of the CSRD (Corporate Sustainability Reporting Directive) as it encompasses all indicators and KPIs, and as Petričević concluded, for regulators, the biggest challenge will be preventing greenwashing, labeling investments as ‘green’ when they are not.
– It is imperative for us to have a high standard of reporting and transparency, and of course, to prevent greenwashing and protect the interests of investors – said Petričević.
Nikolina Markota Vukić, president of the Institute for Socially Responsible Business (IDOP), explained what the EU taxonomy means according to which all companies must align their activities.
– The EU taxonomy is a scientifically based classification system for sustainable economic activities that the EU Commission has transposed into the legislative framework. In other words, what scientists have calculated and said is ‘green’, the EU has transposed as laws – explained Markota Vukić.
Five steps for compliance with the EU taxonomy:
—
- identification of taxonomically acceptable and unacceptable economic activities
- analysis of significant contribution of the economic activity to at least one of the six environmental protection goals according to scientifically based criteria of technical verification – TSC assessment
- does not significantly harm any environmental goal – DNSH assessment
- is carried out in accordance with minimum protective measures
- calculation of KPIs (revenue, CapEx, OpEx) for that activity
—
– Climate change is not the future, it is our present. Croatia is truly threatened by both fires and floods. Therefore, we have sustainable development goals, and the European Union needs additional investments of 185 to 290 billion euros to achieve climate neutrality by 2050 – concluded Markota Vukić.
