Corporate Governance Challenges in Relation to the Esg Reporting

Abstract

Over the last decade, there has been an increasing emphasis on corporate social responsibility in business. The idea has evolved from CSR (Corporate Social Responsibility) to ESG Reporting (Environment, Social, Governance), with the latest trends developing towards a green transition. This genesis of development has been followed by corporate practice and legislation at European and national levels. Consequently, ESG and Green Transition guidelines have been incorporated into the liabilities and duties of the management and supervisory bodies of the company, resulting in a new view of the performance of these functions and their accountability. In this paper, the authors outline the basic postulates and roles of corporate governance bodies and their respective responsibilities for the implementation of ESG and the Green Transition. Sustainability as a value is highlighted in the EU and companies are committed to respecting human rights and reducing their impact on the planet. However, progress by companies (corporates) in integrating sustainability into their governance processes, in particular human rights and environmental due diligence, is still slow, and progress is visible with the drafting of the Corporate Sustainability Due Diligence Directive (CSDD) as a follow-up to the Directive 2014/95/EU (NFRD). The new rules are intended to provide companies with legal certainty and a level playing field. It should provide greater transparency for consumers and investors and should accelerate the green transition and protect human rights in Europe and beyond. These tasks are directly linked to the responsibilities of the authorities in society, who will have to respect these rules and be held accountable for failing to enforce them or for failing to achieve a transfer of capital to the green transition.

Updating the Informational and Control Practices in the Sustainability Agenda

“…Sustainability reporting mixes financial and non-financial information to show a company's economic, environmental, and social impacts (Jovanovic & Jovanovic, 2022), so companies provide data that is more timely, relevant, credible, and comparable and that demonstrates improved ESG performance. With this information, "financial analysts and investors can redirect and accelerate capital flows towards corporate investments that help tackle important problems related to climate crises and the reaching of sustainable development" (Arvidsson & Dumay, 2022).…”

Perception and Identification of the General Public with Sustainable Finance Issues

“…Jovanovič and Jovanović (2023) point out that the concept has progressed from Corporate Social Responsibility (CSR) to ESG Reporting, encompassing environmental, social, and governance factors. This evolution aligns with the current emphasis on green transition.…”