First, let 's clarify what does the ESG abbreviation stand for: "E" is to the English word "environment", "S" is to the English word "social" and finally "G" is the equivalent of English "governance". Large companies incorporated into their vocabulary these terms already on a daily basis, since they already have obligations in this field, whereas the small - and medium size enterprises and micro -enterprises in many cases only take the first steps and try to map the meaning of the comprehensive context of ESG.
Today nobody questions that resources of the Earth are finite and hence the infinite economic growth is simply out of the question . Climate change is the ornate proof of this, which can be experienced by all during the everyday life. Because of people exploiting nature , and seriously polluting environment, such natural processes started that can have irreversible consequences life on Earth in the absence of urgent action. There are many researches that deal with the expected natural consequences, such as the changes in oceans' streams, rising level of water, decreasing agricultural opportunities - nobody knows what will happen exactly, but for sure action is needed. It can be clearly seen that industrial revolution not so much after the agricultural revolution and followed by the information and digital revolution generated dramatic social tension from decades to decade.
Based on these obvious recognitions the European Union after several different attempts started to follow new routes, namely that companies must be forced to act by legal rules because voluntarily steps (like green goods production and distribution , usage of renewable energy sources) will not be enough for an infinite life if all other practices continue the same way . Phrasing goals for action continuously changed and finally manifested in the Paris agreement, in which EU states target to reach carbon neutrality by 2050.
" Sustainability stands in the center of the European projects. It aims to live and work on a fair and green continent. We have the tools to fill in a global leader role in this attempt and we must use them wise."
source: Ursula von der Leyen, President of the European Commission from December 1 , 2019
According to a comprehensive interpretation ESG is no other than a company management that strives for social equality in a way that it restricts nature-exploiting practices and all this can be measured on a structured and comparable level.
Based on these measurements companies set up goals and strategies that are in line with the Paris Agreement and they aim to deliver these goals.
Right now companies can act on a voluntarily basis, but it is already known that it will be soon mandatory to publish non-financial reports about sustainable operation beside the financial reports stated in the law of accounting in law. Currently banks support financially companies based on their mandatory financial reports, however it is not far when the banks will not only ask for sustainability reports , but they will only let their capital into business activities that are in line with Paris Agreement. The commitment of the European Union is shown by the financial sources that they are ready to sacrifice for these goals happening. Based on the sustainability conference of the Hungarian Development Promoting Office that took place in 2023 there are three developmental areas standing in the center of EU subsidies:
- sustainability,
- innovation and,
- digitization;
and three highlighted industries in focus:
- energy,
- climate protection,
- agriculture.
sources of images: unsplash - Markus Spiske, Towfiqu Barbhuiya
