ESG Immaturity Plagues European Companies

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by KnowESG
KnowESG_CSRD and european companies
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On January 5, 2023, the EU Corporate Sustainability Reporting Directive (CSRD) came into effect, expanding the reporting requirements on sustainability for a wider range of companies starting in 2024. However, a recent survey highlights a significant lack of preparedness, particularly in relation to ESG (environment, social, and governance) considerations.

Lefebvre Sarrut, a preeminent provider of legal and tax knowledge in Europe, conducted the survey, which included 744 businesses of various sizes and industries across Europe and gave insights into their ESG maturity levels.

Although there are no substantial variations among countries, almost half of the European companies surveyed lack a dedicated ESG or CSR policy or manager. While the manufacturing industry demonstrates greater maturity in addressing these issues, the services sector significantly lags. Presently, European companies' maturity levels in terms of ESG criteria fall short of EU expectations.

Key findings from the survey are as follows:

  • 40 per cent of European companies are unfamiliar with ESG criteria.

  • 43 per cent of European companies lack a designated reference for ESG criteria.

  • 45 per cent of European companies have not taken any preemptive action in response to the upcoming implementation of the European CSRD directive.

This lack of maturity raises concerns at a time when the EU's expectations are becoming more defined. Starting in 2024, companies with over 500 employees or an annual turnover exceeding €40 million will be required to report on their environmental, social, and governance impacts, aligning with the European CSRD directive. The scope will gradually expand each year, encompassing companies with over 250 employees in 2025, listed SMEs in 2026, and subsidiaries of non-European groups in 2028.

While companies in the industrial sectors (automotive, manufacturing, chemicals, etc.) are often criticised, they stand out for their higher maturity levels in ESG criteria, actively implementing policies to monitor and reduce their social and environmental impacts.

In contrast, the service and consultancy sectors demonstrate immaturity and a lack of awareness regarding expectations and the impending application of the European CSRD directive.

The disparities in maturity can be attributed to the early exposure of industrial sectors to environmental criteria, enabling them to gain valuable experience in understanding and adhering to regulations and implementing ESG or CSR policies. Conversely, service and consultancy companies, previously exempt from stringent regulations, will need to be accountable and reassess their ESG impact.

Camille Sztejnhorn, Director of ESG Impact at Lefebvre Sarrut, emphasises, "Many companies underestimate the future implications of the CSRD directive and the broader environmental, social, and economic issues it raises. Properly understanding and improving ESG criteria can create value, whereas disregarding them risks compromising a company's long-term viability. It is now essential for the 50,000 companies that will soon be directly affected by the CSRD to grasp these issues, equip themselves with specific tools, or seek appropriate support. The earlier they embrace this, the less it will be perceived as a constraint and the more it can be leveraged for development."

To view and compare company ESG Ratings and Sustainability Reports across sectors, follow our Company ESG Profiles page.

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Source: Continuity

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