What is ESG?
What is ESG, and why is it relevant to businesses? ESG stands for Environmental, Social and Governance and covers environmental, social and governance factors. ESG is primarily used when reporting non-financial key performance indicators in areas such as climate, the environment, workplace health and safety, employee matters and corporate governance.
What does ESG mean?
ESG stands for Environmental, Social and Governance. It refers to environmental, social and governance factors. The term is used to describe how companies address and report on matters that are not directly reflected in financial key performance indicators.
An ESG report may cover areas such as climate, the environment, social factors, employee matters, workplace health and safety, and governance. The report is published alongside the company’s annual financial statements and is intended to make it easier to assess the company’s overall responsibility and impact.
What is the purpose of ESG reporting?
The purpose of ESG reporting is to create greater transparency about companies’ activities and their impact on society. When companies report on environmental, social and governance factors, it becomes easier for customers, business partners and investors to assess which companies are attractive to work with or invest in.
ESG is closely linked to the EU’s Corporate Sustainability Reporting Directive, CSRD. The directive aims to encourage companies in the EU to work more systematically towards improvements in areas such as climate, the environment, workplace health and safety, equality, resource consumption and waste sorting.
Which companies are subject to ESG requirements?
In Denmark, selected companies with more than 250 full-time employees have been subject to ESG requirements since 2018 under the NFRD, the Non-Financial Reporting Directive. The NFRD is the predecessor to the CSRD, which extends sustainability reporting requirements in the EU.
The CSRD is expected to be fully rolled out in 2028. The requirements are being introduced gradually and cover, among others, large companies and listed small and medium-sized enterprises.
ESG requirements are being phased in for, among others:
- Companies with more than 500 employees from 2025, based on the annual report for 2024
- Large companies from 2026, based on the annual report for 2025
- Companies with more than 250 employees
- Companies with turnover exceeding €40 million
- Companies with assets exceeding €20 million
- Listed small and medium-sized enterprises from 2027, based on the annual report for 2026
- Selected companies eligible for an exemption until 2028
ESG is linked to EPD and LCA
ESG reporting is not just about overarching ambitions, but also about documentation. An EPD can help demonstrate a company’s climate and environmental footprint. An EPD is often prepared from an LCA perspective, where the environmental impact of a product or solution is assessed throughout its life cycle.
For companies, ESG therefore means that documentation, data and transparency are becoming more important. This applies both to their own operations and to their collaboration with suppliers, customers and other stakeholders in the value chain.
Want to understand ESG in practice?
Read more about sustainability, EPD, LCA and climate in the Hans Buch knowledge hub.
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