ESG: sustainability put into systems.
What the three letters cover, and why it's spreading
Introduction
ESG has become a central concept in many companies. It is about describing and documenting how the company handles its impact on the environment and people and how it is led. The abbreviation covers three dimensions.
The three dimensions
Environmental (environment)
Is about the company's impact on climate and environment: energy consumption, emissions, waste, water consumption and use of resources.
Social (social conditions)
Is about people: employees' working conditions and safety, diversity, and how the company affects local communities and suppliers.
Governance (management and control)
Is about how the company is managed: responsible management, transparency, ethics and corruption prevention.
Who must report?
Under the EU's Omnibus I, only companies with more than 1,000 employees and more than EUR 450 million in net turnover must report under the CSRD. Smaller companies in their value chain are protected against having to answer too much.
Why is data becoming so important?
To document ESG requires data: how much energy was used, how much waste was sorted, what does sick leave look like. This means that recording becomes part of many employees' daily work. Reliable data is the prerequisite for a company to show real progress rather than loose claims.
What can a tradesperson be asked about?
The EU's voluntary standard VSME shows what a small business can typically be asked about. The basic module has 11 disclosure requirements, B1-B11. Here are some of them:
- 01B3: energy consumption and greenhouse gas emissions (scope 1 and 2)
- 02B7: resource use and waste, e.g. the total amount of waste split into hazardous and non-hazardous
- 03B9: health and safety, e.g. the number of workplace accidents
- 04B11: convictions and fines for corruption and bribery
Scope 1 in reality
The chart shows how Danish residential buildings are heated. The same split applies to a company's own buildings: if the company itself burns oil or gas in a boiler, the emission is scope 1. If it buys district heating or electricity, it is scope 2.
Greenwashing — and how to avoid it
Greenwashing is when something is presented as more sustainable than it really is. It is countered by building statements on documented data and by being honest about both progress and challenges. Credibility comes from action, not from fine words.
For the individual employee ESG means especially that daily recording and behaviour actually becomes part of a bigger picture — and that care with data and resources has value far beyond one's own workplace.