Sustainable development and ESG are two terms that currently dominate in entrepreneurship, as they embody the main objectives of the EU with regards to the management of climate change, the environment and the internal development within the Union. In this context, the enforcement of the CSRD Directive (Corporate Sustainability Reporting Directive) will largely determine the financial image of a company and therefore its creditworthiness as well as the interest from prospective investors.

According to the abovementioned Directive, for the evaluation of the development of a company, in addition to its financial data, its "ethical" image will also play an important role, as this will be determined through the ESG criteria and will be detailed in an annual report carried out by the company.

The term ESG refers to the three main factors measuring the ethical and environmental impact of an entrepreneurial investment. These are factors a. environmental (Environmental), b. social (Social) and c. corporate governance (Governance). Each ESG criterion focuses on a different area: environmental criteria examine the performance of the company in terms of environmental management; social criteria examine how the company manages its relationships with its employees, suppliers, customers and communities where it operates, and lastly, corporate governance deals with the leadership of the business, the remuneration of its management and senior executives. It also examines internal auditing systems as well as shareholders' rights.

The application of the CSRD Directive concerns almost all companies in the long term, while its implementation is divided into three phases:

In the first phase, the directive will apply to companies which during the financial year 2024, conduct business on a regulated market, as well as to large companies or groups of companies that numerically exceed 500 employees on average during the reference year.

The second phase will apply to companies or groups of companies that, as of January 1^st 2025, shall meet at least two of the following criteria:

a) Their total assets are at least 20.000.000 Euros,

b) The turnover is at least 40.000.000 Euros and

c) The average number of employees during the reference year is at least 250.

The third phase will apply to small and medium-sized enterprises, which in the year 2026 shall meet at least two of the following criteria:

As for the small ones:

a) Total assets are at least 4.000.000 Euros,

b) The turnover is at least 8.000.000 Euros and

c) The average number of employees during the reference year is at least 50.

As for medium-sized enterprises, they should have:

a) Total assets of at least 20.000.000 Euros,

b) The turnover must be at least 40.000.000 Euros and

c) The average number of employees during the reporting year should be at least 250.

The ultimate goal of the CSRD Directive is to focus on investments with a positive social footprint as a means of rebuilding green and resilient economies. At the same time, the adoption of ESG criteria is considered to strengthen a company's risk management mechanism, including the pandemic, and therefore improves its creditworthiness and boosts investment interest.

As published on cnn.gr