Companies are increasingly aware of the impact their activities have on our world. For some years now, both large corporations and SMEs have been focusing not only on developing their business but also on how to do so in a way that is responsible for the environment, their citizens and future generations. But what are the ESG trends for companies in 2024? Before we dive into them, it is perhaps worth clarifying what we mean by ESG. This acronym is a combination of the terms Environmental, Social and Governance. Many companies are making great efforts to include in their annual results these indicators that go beyond business results in the strict sense. For this reason, we would like to share our vision on this topic, so that it can be of use both to organizations that have not yet incorporated this approach and to those that have already embarked on this path, highlighting some key ESG trends that will give company managers much food for thought in the coming months.
Accountability. CSRD is here
Although the Corporate Sustainability Reporting Directive 2022/2464 (CSRD) is not new, its implementation will be. In 2024, it will undoubtedly be a major challenge for companies, as this European directive seeks to standardize sustainability reporting and increase the transparency and comparability of companies’ ESG performance information. The requirements are much more ambitious than the current Non-Financial Reporting Directive (NFRD), materialized in Spain in Law 11/2018, of December 28 since not only new quantitative indicators will have to be addressed, but also qualitative information will be very important, such as policies, impacts, risks and opportunities. We are talking about reporting up to 1,300 KPIs.
Collaboration with public agencies
Synergies between the public and private sectors have proven to be very beneficial for both in many fields. From the training of new professionals to the strategic autonomy of countries, this joint work has been very fruitful in economic and social terms, and now also for our environment. Involving the productive sector in programs as ambitious as the 2030 Agenda is a major boost, since private enterprise has a series of capabilities that can complement those areas that the public sector cannot reach due to a lack of resources. On the other hand, companies can contribute, with their experience in the field, to the development of a realistic and beneficial regulatory framework for all. All this, without renouncing any basic element for our sustainability and allowing us to achieve the same results without renouncing the economic benefits that any activity entails.
Increased visibility on the impact of the company’s activity
Large companies are proactively disseminating the measures they are taking to reduce their carbon footprint, inequality among professionals or any type of discrimination that may arise in a social context where many people are obliged to share time and space for many hours of their working day. Beyond the more formal publications, such as sustainability reports or executive summaries, which are prepared annually, organizations are using more direct channels such as social networks to disclose their ESG program. The reason for this increased transparency is that many consumers are increasingly scrutinizing the profiles of the companies from which they buy their products and services, assessing their ethical and social values. Consumers prefer to spend a little more money if they feel that their purchase is being more respectful of the environment and the communities in which the company operates. In addition, a job seeker will tend to look more closely at those organizations whose employee value proposition is in tune with his or her way of seeing the world. And in a context of talent shortage, no company can afford to give up an employee for not betting on and demonstrating that it has a diverse, inclusive and respectful work environment.
Concrete and measurable goals: equality, wages, CO2 emissions, etc.
Further to the previous point, a company’s ESG objectives must be as clear and quantifiable as its turnover targets. Therefore, one of the ESG trends for companies in 2024 will be the establishment of a series of metrics that should be incorporated into their accounting performance and that will allow them to say, in a clear and objective way, whether they are being consistent and complying with these measures. For some years now, companies have been publishing the percentage of women in their workforce and executive team. Another easily measurable element is the difference in levels or salaries between the highest and lowest paid members of staff. Companies can also quantify the impact of their activity on the environment by sharing their electricity consumption, water consumption or carbon footprint. The goals of the 2030 agenda can be, in this case, a clear example of inspiration to see which areas we should attack by putting our most quantifiable actions in black and white.
Implementing AI responsibly
Artificial Intelligence has undoubtedly been the technology that has aroused most interest in recent years. No one questions the great value that its implementation can bring to an organization, eliminating the most tedious tasks and allowing its professionals to devote more hours of time to valuable activities with a greater impact on business results. It is not surprising, therefore, that AI is sneaking in as one of the ESG trends for companies in 2024. In fact, one of the concepts that has been gaining traction recently is that of responsible AI, which aims to stop this technology from being a black box for many. Employees must understand what its use consists of and how it will be applied in each organization. Being able to evaluate and develop this technology in our day-to-day activities in a way that is safe and in line with our business values will not only enable us to benefit from its capabilities. We will also have the support of all our professionals, making the most of it to achieve our goals.
Involve all actors in the value chain
A company must be able, as we have seen, to demonstrate that its business activity is carried out in a responsible manner, both with its employees and with the environment. This good practice must include both employees and all the elements that play a decisive role in its value chain, both upstream and downstream, especially suppliers. The image conveyed by a company’s suppliers is taken into account by the end consumer as much as that of the company’s own employees. In the absence of this difference before the consumer, organizations must be just as careful when hiring a worker as when buying or contracting an external service, ensuring that these companies have values in tune with their own. They must also ensure that the price they pay for these goods and services is a fair market price.
Daniel Garrido, director of SRI and CSR in Grupo Oesía