Before introducing any new directive, the European Commission conducts an analysis of what is not working in the sectors, based on investor complaints. In a review in 2013, they found that only 6 percent of companies published non-financial reports, and they assessed that non-financial information was not sufficiently transparent and material. This was explained by Andreja Pavlović, head of the Institute for Nature Conservation and Landscape at OIKON, at the Lider conference on Sustainable Finance. Given that the information was not reliable and accurate enough, and that positive aspects were highlighted while negative ones were concealed, the European Commission decided to initiate a reform.
Reliable information about the sustainable operations of companies is crucial for investors to redirect capital from unsustainable to sustainable economic activities. However, as many as 93 percent of investors believe that companies are not ready for this. On the other hand, 93 percent of companies in the EU believe they are ready for sustainable reporting. Additionally, a 2020 study by the Climate Disclosure Standards Board, which covered the 50 largest companies in the EU, showed that 76 percent of them are not ready for quality reporting on climate and environmental risks, and a similar situation exists with companies in Croatia, Pavlović pointed out.
– BAT Adria has been working on ESG for many years, and since the company’s headquarters is in the United Kingdom, which is no longer in the EU, we will have slightly different rules. However, in addition to ESG, we have added a component H which stands for health (health) – said Lozančić, adding that with a recent investment of 600 million kuna in new production lines for less harmful products, they followed the strategy for building a better tomorrow (A Better Tomorrow).
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Mirna Marović, director of VentureXchange, pointed out that every EU country should invest 2-3 percent of GDP in the green transition to achieve the goal of climate neutrality by 2050, and that all new rules have been introduced to direct private investors who can finance green and sustainable initiatives.
– In Croatia, 59 companies have published sustainability reporting, one has been verified, and only 12 have been made with global standards, which shows us that the quality of these sustainability reports is at low levels. We are living in a transitional period where all these practices and standards will be gradually introduced at the EU level. Around 2026 and 2027, we will be truly ready – said Marović.
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In this regard, Višnja Mrakovčić Supek, managing director of European Bank for Reconstruction and Development, said that even small companies must already think about ESG because ‘they are not isolated cases in the market and financial institutions and investors are looking at how these small businesses operate’.
– We look at our clients, small and medium-sized enterprises, in a way that we analyze their environmental aspect, what they can improve, the social and governance components, and we have added a digital component that is very important to us. Small entrepreneurs will also feel the benefits, through savings, potential EBITDA increase, attracting larger clients – said Mrakovčić Supek, adding that the EBRD is currently conducting education for small and medium-sized enterprises on raising awareness about ESG.
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