*Rita Brito e Faro at maze office*
<aside> 🌳 ESG can be misunderstood as an adversary to business growth and profitability. However, this perception is far from accurate. Embracing ESG principles can be a powerful driver of business success, fueling profitability and creating sustainable value for all stakeholders in the long run. Mitigating risks and strengthening stakeholder ties are just a few examples of how running a business responsibly can be a strategic advantage. It’s Blackrock research who says it: during the Covid-19 pandemic, sustainable indices outperformed their parent benchmark$^1$. ESG is not the enemy; instead, it's a business's ally in navigating the challenges and opportunities of the modern world.
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The benefit of transparency applies to our relationships just as it applies to companies and their stakeholders. When a company is transparent about its operations, stakeholders feel more confident and reassured about its integrity.
Good reporting means granting access to ESG data to investors, partners, suppliers, consumers, and employees. When it is done right, stakeholders can be more informed about their relationship with a company, both ethical and financial. For instance, stakeholders should care if an energy company is investing in green alternatives - first because it impacts the climate, but also because its financial sustainability might be compromised in the long term if it’s not. On the consumer side, I am sure many of us already felt deceived by sustainability claims that were not backed by strong evidence and felt delighted and empowered when they were. In addition, consumers often want to compare brands based on their sustainability practices but they do not have enough information to do so.
Providing this information is an ethical responsibility of companies. A few have been doing it voluntarily for a long time and should be praised for that - like Patagonia and Unilever. Some, amid competing priorities, see reporting as secondary and do not invest enough in producing quality reports. In worst cases, companies that are not particularly proud of how they do business do not have incentives to make this information public.
Aware of these latter cases, the European Commission is strongly committed to mainstream reporting best practices for companies operating in Europe. It does so through many different regulations, but CSRD (Corporate Sustainability Reporting Directive) might be the most encompassing one - both in the number of companies covered and the amount of information that must be disclosed.
<aside> ℹ️ CSRD aims to make reliable and structured sustainability information available to various stakeholders. It does so by forcing firms to disclose their environmental and social impacts, and how their environmental, social, and governance (ESG) actions affect their business. These two effects - non-financial and financial - are what CSRD calls double materiality.
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CSRD will gradually apply to more companies, according to their size. The timeline below shows, for each fiscal year (FY), which companies will be added to the scope of CSRD. Companies that become eligible in a certain fiscal year will have to publish the report of that year in the following year.
Maze has been supporting companies in their voluntary reporting efforts for over 10 years, and we are happy to see that, even if pushed by regulatory obligations, many others are now following. We don’t see regulation as a burden but as an incentive to accelerate the process of companies becoming more socially and environmentally responsible. As such, when working with companies, our goal is not to solely help them be compliant with regulations. Instead, we push our clients and partners to raise the bar as high as possible to the benefit of their business, society, and the planet.