The EU is getting serious when it comes to ESG reporting by companies. Since 2017, publicly traded companies, banks and insurance companies with more than 500 employees have been reporting on the environmental compatibility of their actions. From 1 January 2024, companies in all economic sectors will also be obliged to do so. For small and medium-sized enterprises (SMEs – defined as companies with less than 250 employees and a turnover of maximum 50 million euros), this obligation comes into force two years later. Companies based outside the EU must also comply with this directive if they are active in European markets and generate annual sales of at least EUR 150 million. Once the reporting requirements for SMEs come fully into force, it is estimated that around 50,000 companies in the EU will have to disclose their performance in the three ESG areas annually: environmental protection (environment), employees and relations with society (social), and corporate management (governance).
Pressure from the EU.
The expansion of reporting on ESG issues by sectors and themes is in line with the European Green Deal, a package of EU policy initiatives that aims to make Europe carbon-neutral by 2050. Along the way, there is an interim target, which states that greenhouse gas (GHG) emissions should be reduced to 55 per cent of 1990 levels by 2030. The EU believes that sustainable finance is a key component in making this plan a reality.
Influence of public and private activities.
Europe may be at the forefront of ESG reporting requirements but advances and discussion on this topic are taking place around the globe. The 2030 Agenda for Sustainable Development, which has been adopted by all United Nations member states, has been in effect since 2015. Since then, advances in achieving the Agenda’s 17 defined goals have been recorded in annual progress reports. Worldwide, many nations, public and private institutions as well as business organisations and well-known companies have initiated programmes that are intended to help advance sustainability.
Committed to the entire supply chain.
Consulting firms and experts assume that companies that work on their own ecological footprints and handprints – whether mandated by law or on their own initiative – also expect transparency on these issues from the companies in their supply chains. Especially for the plastics industry, which has come under increased public scrutiny, these new reporting requirements are already likely to become a fact of life in the medium term.
Practice-oriented Swiss solution.
We can inform you here that Otto Hofstetter AG has already dealt with the ESG reporting challenge. We provide information about the ESG performance of our products and our company using a rating and reporting tool developed in Switzerland. The initiators are the Center for Corporate Responsibility and Sustainability (CCRS) at the Fribourg School of Management along with some well-known companies from the Swiss financial sector.
The tool, called esg2go, is a practice-oriented system that enables SMEs to produce a quantitative assessment of their sustainability performance. In addition to the environmental, social and corporate management factors, which must also be accounted for with other sustainability tools, esg2go also records a company’s handprint, which is the measure of the positive sustainability advances a company has already accomplished.
Compliance with international standards.
The esg2go assessment process is completely digital and completed in six steps. The entries are converted into predefined key performance indicators that are assigned to the individual ESG areas in the form of scores and combined to produce an overall result. Taking into account a company’s size and industry as well as comparative figures from that industry, esg2go provides Otto Hofstetter AG with a transparent and comprehensible result. The findings of the esg2go system can be easily transferred to other standards such as those of the Global Reporting Initiative (GRI) and the German Sustainability Code.
Switzerland is on the right track.
Switzerland ranks at the top of two important ecological performance surveys, the Environmental Performance Index (EPI) and the Global Sustainable Competitiveness Index (GSCI). The EPI was developed by two US universities, Yale and Columbia, together with the World Economic Forum and the Joint Research Centre of the European Commission. The overall ecological performance of 180 countries has been calculated based on their performance in 10 main categories.
The GSCI has been published by SolAbility, a think tank, since 2012. This Korean–Swiss joint venture has developed a range of guidelines, strategies and management tools to promote sustainable business. The GSCI measures the competitiveness of countries using 131 quantitative indicators. Data comes from reliable sources such as the World Bank, the IMF and various UN agencies. In the 2021 GSCI Report, Switzerland came third. Switzerland occupies the top spot in the individual category of Resource Intensity, where it scores 96 out of 100 per cent.
Electricity from renewable sources.
The pleasant living conditions and political stability in Switzerland probably played a significant role in the country’s impressive ratings. Likewise, the fact that around 80 per cent of the electricity in the Swiss grid comes from renewable sources probably also helped its ratings. In 2021, some 68 per cent of Switzerland’s electrical energy was produced by hydroelectric power plants. More than 11 per cent came from new renewable energy sources such as sun, wind, biomass and small hydroelectric power plants. Since 2018, energy providers have had to publish a detailed account of the origins of their electricity. This means that consumers know the sources of the electrical energy they consume. Thus, they can choose the mix they prefer and actively support ESG criteria.
Facts, not just declarations of intent.
With esg2go, Otto Hofstetter AG is already equipped for the future of ESG reporting. It can provide customers with precise, comparable, tested and internationally recognised facts about its achievements in the three dimensions of sustainability. And facts mean more to industry regulators than superficial greenwashing PR or lofty declarations of intent.
