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ESG reporting refers to the process of disclosing a company’s practices and performance in Environmental, Social, and Governance areas. This type of reporting provides stakeholders, investors, and consumers with transparent insights into a company’s ethical and sustainable practices. ESG reporting is important because it helps investors assess long-term risks and opportunities related to sustainability, making it easier to make responsible investment decisions. Additionally, companies with strong ESG performance often enjoy enhanced reputations, better operational efficiencies, and increased market appeal. As global awareness grows, so does the importance of ESG reporting, driving more companies to prioritize sustainability in their business models.

Not for everyone - yet! ESG reporting is increasingly mandatory within the European Union. Under the Corporate Sustainability Reporting Directive (CSRD), many EU-based companies must now disclose detailed information about their environmental, social, and governance (ESG) practices. This directive, effective in stages beginning in 2024, applies to large public-interest companies, including listed companies, banks, and insurers, with plans to expand to other sectors and smaller companies in the coming years. The CSRD mandates comprehensive sustainability reporting, which is designed to enhance transparency, promote responsible business practices, and help investors make informed decisions based on companies’ long-term sustainability.

To report on ESG, companies typically follow recognized ESG reporting frameworks and standards. Commonly used frameworks include the Global Reporting Initiative (GRI) and the European Sustainability Reporting Standards (ESRS). These standards cater mostly to larger enterprises, and help companies prepare structured, detailed reports covering relevant ESG metrics, from environmental impacts and social responsibilities to governance practices. Companies can gather data on their sustainability initiatives, analyze their impact, and present their findings in ESG reports. For smaller companies, the go-to framework is the Voluntary Small- and Medium Sized Business framework, which is built based on the ESRS framework, and helps smaller companies form a solid foundation for their ESG reporting, while satifying the needs of larger clients to report properly.

For European companies, key ESG reporting standards include the ESRS (European Sustainability Reporting Standards), GRI (Global Reporting Initiative), and the VSME Standard for smaller companies. The ESRS, central to the EU’s Corporate Sustainability Reporting Directive (CSRD), mandates detailed reporting on environmental, social, and governance factors to align with EU climate goals. Larger companies often also use GRI standards, which address broader global sustainability issues. For very small and medium enterprises (VSMEs), the VSME Standard simplifies ESG reporting, reducing complexity and administrative burden while still meeting regulatory requirements. This approach ensures that companies of all sizes can engage in effective, transparent ESG reporting across the EU.