I see a risk that Sustainability crosses the fine line that separates transparency from bureaucracy. In a recent article on future ESG reporting requirements for businesses, I counted up to 11 acronyms from different agencies and regulations.
The development of ESG taxonomies and other legislative frameworks is taking place mainly at a regional level, as it is the case in the European Union. On the other hand, multiple organizations and forums are working individually on the design of tools such as carbon credits or impact measurement.
The convergence of this diversity of policies and criteria is inevitable, although it will be progressive and, in many cases, it will remain in coexistence without reaching integration.
The challenge for companies is, therefore, to make the development of their business compatible with increasingly demanding ESG normative requirements.
This challenge is especially relevant for SMEs, which are very pragmatic and have a sustainable fiber. In the European Union, these companies, depending on their size, may have to report information on sustainability from 2025. In my opinion, two courses of action can translate this need into an opportunity for these companies:
- Develop ESG ecosystem intelligence in terms of regulation, methodologies and stakeholders. This will help them to build criteria in advance about how and with whom to make this journey.
- Use this ESG intelligence to verbalize and foster the sustainable component of the business model. For example, sectors undergoing transformation due to the energy transition and the circular economy and decarbonizing startups are a valuable and highly accessible source of inspiration and collaboration.
Complying with the ESG regulatory framework will be a natural process of strategic and operational enrichment for genuinely sustainable companies, one additional formal requirement for the rest.