Utilizing ESG Requirements as an Opportunity for Advancement

Today, a company’s economic success depends not only on revenue and profit but also on other factors important to stakeholders. Customers, investors, and (potential) employees increasingly value ESG criteria. How can companies in Vorarlberg use this development as an opportunity?

What is ESG? ESG stands for Environment, Social, and Governance.

• Environment (E) includes all measures to protect the climate and environment, such as reducing greenhouse gas emissions and conserving resources.
• Social (S) encompasses responsibility for employees, including workplace safety, health protection, diversity, and social engagement.
• Governance (G) describes responsible corporate management, including company values, control processes, sourcing, and collaboration with partners.

Who is affected? The EU has developed new regulations and directives that companies of a certain size (publicly listed companies, banks, and insurance companies with more than 500 employees) must comply with from 2024 onwards.

Although not all companies are currently required to report, the issue will gradually affect SMEs as well. Many large companies impacted by ESG already expect their smaller suppliers to comply with the laws and provide comprehensive reports on their sustainability activities.

Am I ESG-ready? It is advisable to engage with ESG early. In this constantly evolving landscape of regulations, the Wirtschafts-Standort Vorarlberg GmbH (WISTO) offers a free ESG Sustainability Check as a starting point. This check consists of an online interview and a feedback discussion. The goal is to identify the company’s ESG compliance and individual areas for action.

Leveraging ESG as an Advantage For Vorarlberg, this development is relevant in many ways. In today’s dynamic economic landscape, local, export-oriented companies are called upon to consider ESG criteria. They face the challenge of proving that their activities are environmentally sustainable and meet ESG criteria. Many regional companies already operate holistically and can now use this development as an opportunity for a competitive edge.

What regulations and directives exist?

• The EU Taxonomy is a classification system that defines which economic activities are considered sustainable.
• The CSRD (Corporate Sustainability Reporting Directive) requires companies to disclose their sustainability activities (human rights, social and environmental information, corporate governance) in a report. This report should document the risks and opportunities of the company’s activities concerning sustainability and their impact on society and the environment.
• The SFDR (Sustainable Finance Disclosure Regulation) asks financial companies to disclose what sustainability considerations are made in their financial products and the negative impacts these products have on sustainability.

Seizing Opportunities Even though much is still legally open, engaging with environmental, social, and sustainable corporate governance aspects in a meaningful way is desirable and can lead to significant competitive advantages. Greater transparency strengthens trust among customers, investors, and the supply chain, thus enhancing market position.