Green transition and ESG reporting: new challenges for employers

The UN Climate Change Conference, COP29, was held in Baku, Azerbaijan, on 11-22 November. As a forum that every year brings together almost every country on Earth, it holds immense significance in addressing global climate challenges and creates an opportunity to exchange points of views. Climate change and its impacts are gradually becoming a part of our everyday reality, making decisive action in this area more crucial than ever.

The private sector plays a vital role in this green transition as employers. While eager to contribute, employers are raising numerous questions about their specific role and efforts, the steps they should take, the associated costs, and, of course, the potential benefits they can gain from it.

Mandatory non-financial reporting as a step towards green transition
The green transition is not a new concept in the market, including the labour one. However, it has gained significant momentum recently, when the obligation to report ESG has become
a prominent topic of public discussion. In coming years, this obligation will apply to an increasingly larger group of businesses.

 In 2025, under new rules, the following will be reported

• for 2024: entities operating on the broadly understood financial and insurance market or listed companies that meet two of the following three criteria:
  • average number of people employed in the financial year: 500
  • balance sheet total 85 million złotys
  • net sales revenues 170 million złotys
• for 2025: large enterprises and parent entities that meet the appropriate employment and financial criteria
• for 2026: SMEs who meet the appropriate employment and financial criteria

So we need to know more about ESG, the labour market and green transformation. How can ESG reporting influence an employer’s impact?

The employer’s role in reporting environmental issues in ESG
All employers required to report non-financial ESG under the environmental pillar, should include such factors as climate change, natural resources and greenhouse gases, including their energy consumption (how much of it comes from renewable sources), and water and waste management. Environmental indicators relate to a company’s impact on the environment and to the potential environmental challenges that may affect its business. This is why these indicators can vary significantly between employers or may not be applicable at all. Even if an employer does not identify significant environmental risks, it is still important to consider the environmental area. While the employer may not be required to take steps to improve certain factors related to its operations, it can still contribute to sustainable development by introducing appropriate internal policies or practices.

ESRS, the employer’s tools for non-financial reporting
However, the EU legislator has not left employers who will have to deal with non-financial ESG reporting for the first time alone. They will also have to raise environmental issues in their reports. The instrument that employers who will report ESG have been equipped with are the European Sustainability Reporting Standards (ESRS) and their annexes. The ESRS provides guidelines on the specific data that employers must report as part of ESG reporting and the tools they can use to do so. In the context of environmental reporting, the ESRS addresses climate change from the perspective of governance, strategy, impacts, risks and opportunities, and indicators and targets, including energy consumption and greenhouse gas emissions.

Foreign market practices focused on the green transformation worth imitating
Non-financial reporting and green transformation have been present in business for many years. For this reason, many firms have already implemented solutions that employers who will be required to report for the first time will now be able to use. Many of the initiatives in this area concern the green transformation. A popular solution within the framework of the green transformation, especially among US businesses, is the circular economy. The key principles of this policy are the reduction, reuse and recycling of products, materials and raw materials used (the so-called 3Rs). Employers can contribute to improving their company’s environmental impact by introducing rules related to waste segregation, water use and consumption management.

Local market practices focused on the green transformation worth imitating
Some of the most interesting initiatives on the Polish market include running bee farms by employers, distributing bee flower seeds, and organising employee participation in forest and meadow restoration. Additionally, car-pooling, e-bikes and e-scooters, are also becoming increasingly popular in major corporations. Employers are not only providing employees with platforms to arrange car-pooling but they are also offering employees electric company cars for this purpose to reduce emissions. To ensure employee safety, employers also provide additional equipment necessary to safely use the vehicle or device, such as helmets and protectors. Another step towards the green transformation related to transport could be the introduction of sustainable business travel arrangements. An employer could encourage employees to choose eco-friendly modes of transport for business travel or opt for virtual client meetings, employer-organised events and conferences whenever possible.

Other common practices that represent an important step towards green transition by employers include digitising documentation, reducing the uncontrolled use of air-conditioning and heating, switching off unused equipment such as printers or scanners, and phasing out unnecessary marketing materials, including leaflets, brochures and welcome packs. Encouraging employees to reuse and repair equipment instead of buying new devices is another effective strategy for reducing environmental impact.

Summary
ESG-focused employers with a strong commitment to environmental, social, and economic issues, are gaining a competitive edge in the market. This is primarily due to the fact that young people, especially Gen Z, are increasingly considering a company’s sustainability efforts when choosing an employer. They appreciate companies that not only prioritise employee well-being but also actively promote environmental sustainability and give their employees opportunities to engage in the environment and climate actions. Even a simple internet search allows us to find various studies conducted among this age group, which allows us to assume that ESG and green transformation issues will become increasingly important. ESG reporting will certainly be a big challenge for employers and will require decisive steps, but in the long run it will bring many benefits, not only for employers, but also for the environment.