Introduction to Environmental Social Governance (ESG)

Environmental Social Governance (ESG) relates to a company’s impact on the environment and its efforts to protect the natural environment, its relationships with stakeholders and communities, and the leadership structure that oversees all company operations. In short, ESG considerations provide the tools to realise a company’s value-driven business strategy and represent the sustainability of a company.

ESG is not only about protecting the company but enhancing it. Many core ESG concepts will create value towards the company and make it more attractive to investors. Companies undertaking such steps before they are legally required to do so will have the option of better understanding the space and being ahead of those who wait.

ESG is a topic that has been around for two decades, however it wasn’t until the past couple of years that it began gaining traction within broader society which has resulted in an unprecedented number of legal instruments that are shaping how all organisations operate and leading to a cultural change. Companies are taking stock of their impact and looking for a more balanced approach between their profitability and environmental and social impacts. Those that do not will likely face difficulties in retaining and attracting talent from younger generations and being a top choice for other investment purposes.

Legal instruments

Historically there has been policy relating to a company’s financial disclosures, but there has been a more recent push into the disclosures of non-financial reporting information. The main substantive ESG-related regulations are the: Sustainable Finance Disclosure Regulation (SFDR), the EU Taxonomy Regulation, the EU (Disclosure of Non-Financial and Diversity Information by certain larger undertakings and groups) Regulations 2017 (Amended), which transposed into Irish law the Non-Financial Reporting Directive (NFRD), and the Corporate Sustainability Reporting Directive (CSRD).

The CSRD is the most recently published regulation approved in November 2022. The CSRD is a significant update to the current reporting directive and will place ESG considerations at the forefront of European company reporting. The new rules proposed in the Directive will increase the number of companies required to report from 12,000 to over 50,000. They will be implemented in phases for different financial sectors for adequate prep time. The CSRD will require its disclosures to be made by the European Financial Reporting Advisory Group (EFRAG) new standards, the European Sustainability Reporting Standards (ESRS).

The SFDR is mainly for asset managers and other financial market participants to combat greenwashing in operations and increase knowledge and transparency in organisations’ sustainable practices. The EU Taxonomy Regulation is a classification system designed to determine whether a company’s activity is sustainable or not. In Ireland, further regulation, the Taxonomy Climate Delegated Act, came into force on January 1, 2022. This Act aims to implement the EU Taxonomy by establishing national criteria to determine the economic sustainability of an action and if the action contributes to climate change mitigation efforts.

Disclosure frameworks

ESG reporting frameworks are systems for the reporting and disclosing ESG information; they will often vary widely in areas of focus and the metrics they recommend. This creates confusion in an already complex landscape in which one reports on environmental and social issues. The frameworks also operate in quite a broad manner or focus on a niche aspect within a pillar.

The Taskforce for Climate-related Financial Disclosures (TCFD), the Sustainability Accounting Standard Boards (SASB), the GRI, the Carbon Disclosure Project (CDP), and the International Integrated Reporting Council (IIRC) play a significant role in promoting transparency between organisations, investors, and stakeholders. These standards, along with the new ESRS standards, are the main forums companies use now, and they represent global best practices for ESG reporting.


Materiality refers to organisations’ significant economic, environmental and social impacts or issues that substantively influence the assessment and decisions of stakeholders. A new sector of materiality is being introduced, known as double materiality. This materiality looks at a company’s impact on specific issues, such as climate change, and specific issues that impact business operations. Double materiality adds to the risk that company activities pose to the environment, society, and those it will face internally. In short, ESG considerations provide the tools to realise a company’s value-driven business strategy and represent the sustainability of a company while understanding how material issues affect the business.

By being selective in what ESG issues companies wish to address and prioritise, they can add value in connection to those specific issues. Examples of material ESG topics include:

  People and organisation 

  • Diversity and inclusion
  • Occupational health and safety
  • Community work
  • Skill development
  • Landowner interations


  • Supply chain management
  • BNG and nature conservation
  • Waste management
  • Efficiency of travel
  • Ecosystem service and impacts


  • Responsible marketing and advertising
  • Data security/privacy
  • Ethics, values and culture
  • Business ethics
  • Due diligence


  • Material sourcing
  • Ensuring PPE and field preparedness
  • Water and effluents
  • Responsible consumption


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