ESG criteria – An instrument for transitioning to a sustainable economy

The American Chamber of Commerce in Croatia (AmCham) held a conference entitled “Business sustainability with ESG principles”. While the world faces all kinds of grave challenges – from climate change to social inequality – the business sector has the responsibility to make a change, as well as the potential to usher in significant opportunities that can help build a more prosperous future for everyone. That forms the basis for a good strategy for sustainable growth and development that is not driven solely by generating profit but one that also includes reaching zero net emissions, good employee care, and transparency in the decision-making process – all the elements that make a successful company that helps people improve their lives in the long term.

In his introductory presentation, Director at Kearney Mitja Pirc presented the results of a study in which two-thirds of Global Private Equity firms claim that they have integrated an ESG approach into their investment strategies. Still, only 8% of them are signatories of the UN Principles for Responsible Investment. It is too often the case that ESG is seen as a PR issue rather than as a strategic priority for companies. The facts are clear: when analyzing global industries, we discover that investments in ESG bring up to 100% premiums in valuation; in the EU, 30% of customers are ready to pay premiums for products that positively impact ESG activities, while more than 60% of employees ask about the company’s business sustainability during the hiring process.

“ESG is a very important topic for Raiffeisenbank Austria (RBA). We are carrying out internal green transition processes through the Sustainability Department, and ESG practices have also been implemented into our business model by creating products and services that steer funds into sustainable projects. We can proudly say that we are the first bank to start issuing Sustainability Bonds through which we have raised 200 million euros that will be used to fund green and social projects of Croatian businesses,” said Ante Odak, Member of the Management Board at Raiffeisenbank Croatia.

A panel discussion followed the introductory presentations. The panelists were Ana Zorić, Director of the Directorate for Economy and Financial System at the Ministry of Finance; Ante Odak, member of the Management Board at Raiffeisenbank Croatia; Marija Pujo Tadić, President of the International Institute for Climate Action (IICA), Amorella Horvat Topić, ESG Services Manager at PwC Croatia, and Ivan Franičević, President of the Management Board of Rasco. They discussed the adjustment of the business sector to the adopted legislation, the obligations of Croatian companies, and the future impact on business practices.

“The European Union is, as it has been in many other fields, a pioneer in the transition to a climate-neutral, climate-resilient, resource-efficient, and just economy. Even though this is a long-term project, a sustainable and inclusive financial system, and with that, the economy as a whole, along with activities directed at environmental sustainability, will be key elements for reaching the goal of Europe being the first climate-neutral continent,” said Ana Zorić, Director of the Directorate for Economy and Financial System at the Ministry of Finance.

Marija Pujo Tadić, President of the International Institute for Climate Action (IICA), said that climate change was one of the biggest challenges of the 21st century and that our method of handling its consequences will highly depend on how we prepare our economy. The Paris Agreement established the goals for reducing CO2 emissions and sketched the path towards a low-carbon, sustainable economy for the entire world. The instrument for transitioning to a sustainable economy is the so-called ESG criteria, and their introduction is becoming compulsory in the financial and business sector. The integration of ESG criteria entails the strengthening of countries’ capacities to deal with the consequences of climate change, which includes all-encompassing education about ESG on all levels within companies and financial institutions that will contribute to transparent and ethical business activities in the full sense of the word, in all segments of society.

“Business sustainability, that is, business that includes social responsibility in its strategic thinking, is not a new concept, so as experts in business sustainability, we were not surprised by the EU regulation, except perhaps by its scope. We can say that ESG is just a new name for systematic tracking of the sustainability of companies and transparent reporting. ESG systematizes and compares sustainability strategies and the companies’ progress in their implementation. What we always highlight to businesses is the fact that ESG is an excellent tool for the systematic tracking of risks and their reduction. It helps recognize opportunities that will only bring results and secure financial gain with the right sustainability strategy, whether by cornering new markets or by extending the offer to existing customers/clients,” said Amorella Horvat Topić, ESG Services Manager at PwC Croatia.

ESG can sometimes seem like an unattainable goal reserved only for large companies. However, more and more companies serve as an example that this is no longer the case. Ivan Franičević, President of the Management Board at Rasco, said they regularly receive customers’ questions about ESG practices. If they had not already decided to focus on sustainability, they would have been driven to it sooner or later by the market. Sustainability is not reserved only for large companies anymore – these days, companies of all sizes have no choice but to turn to sustainable business practices, Franičević concluded.

The event was attended by more than 140 people from the public and private sectors alike.