ESG Trends: Sustainability Is No Longer Just a Reputational Issue

Sustainability within companies is no longer just a matter of reputation.

A few years ago, companies’ boards of directors decided to commit to sustainability through solidarity or non-profit projects. This approach was intended to show the world that they were promoting their corporate social responsibility, to gain reputation, or even to achieve social benefits in their financial statements.

The current reality is forcing companies to modify these strategies due to the obvious signs of climate change. The fact is that the world is forcing the business sector to move towards sustainability as a duty and not just as a marketing or business positioning strategy.

The UN 2030 agenda and sustainable development goals (SDG) or the Paris Agreement are just some of the many treaties of international organizations pushing companies to comply with sustainability, measure the impact of their activity, and make it known. Even the European Commission included a goal to redirect capital flows towards sustainable investments in its Action Plan, that is, to include an analysis of sustainability and its impact on the investor’s risk management.

In this sense, the change in mentality can be observed in applying Environmental, Social, and Governance (ESG) criteria when investing in an asset or a company. Awareness of these requirements and accreditation by investors that the asset or company complies with them helps to label the transaction as a socially responsible investment, which in addition to facilitating the transaction-related processes, would also improve the reputation of the companies involved. One more demonstration that obligation and good practice can go hand in hand.

Moreover, to help this business culture transformation, the European Commission promoted a taxonomy of sustainable finance-related measures. As proof of the mandatory nature of this matter and the essential transparency that comes with it, Spanish companies subject to NFRD and that carry out environment-related activities must from this year comply with the obligation to disclose information in compliance with Article 8 of the aforementioned European Taxonomy Regulation.

Aimed at favoring companies in this matter, many service companies and prominent consulting firms within different industries are clearly committed to redirecting or expanding their services to advise their clients on anything involving sustainability and regulatory compliance. Environmental Due Diligence studies are one of the many analyses currently demanded by companies whose services include, for example, waste management, soil contamination, hydrogeological issues, lead or radon, among others, and that is beginning to become aware of the importance of transparency that their activities involve and the need to adapt to current environmental and social demands.

Until now, the reputational dimension that sustainability used to have been reduced to presentations of energy efficiency studies. Energy audits, previously carried out for the company’s employees to know how sustainable and ecological their company was, are now required on a mandatory basis per Royal Decree 56/2016 and entail serious economic consequences if they are not carried out. This is just one among many examples of how world organizations have put pressure on countries to force their companies in favor of sustainability.

Nevertheless, this equation also presents an opportunity with two antagonistic concepts, such as reputation and duty, facing each other. Regulations, legislation, and the various obligations that companies have to face in terms of sustainability must be seen as a requirement to participate in financial aid programs such as the Next Generation funds. Those business projects committed to the growth of the economic fabric in a sustainable way will earn points when receiving this European aid.

In short, companies have the chance to demonstrate and raise awareness of the importance of sustainability despite the duty placed on them, and that may be causing headaches on many occasions. At the same time, this new need is an open door to great business opportunities, especially for those consulting and service firms, which have the advantage of being able to expand their offer and help their clients grow and evolve in this regard.

On the other hand, a change in mentality is required. Just as companies present their financial results, they must also deal with non-financial ones. And just as financial consulting firms assist them, companies should also be obliged by consulting firms specializing in sustainability to achieve this. A company’s reputation is no longer measured by how sustainable it is, and this is due to legislative pressure from governing bodies to take care of the environment. On this occasion, it can be asserted that not only does an obligation favor companies but also all of us who struggle to take care of the planet on which we live.

ESG Specialization

In this sense, VRG Spain (Gesvalt) has launched a new business line to create a specialized team focused on providing advice to companies on energy audits, green financing, or environmental certifications and studies. With these services, companies can meet information requirements raised by most governments and administrations within the global agenda for climate change.

Energy efficiency is one of the issues that companies must take into account to comply with current legislation. For this reason, Gesvalt offers in this new list of services the possibility of carrying out energy audits from its simplified version (EPC) to the extended one (diagnostic energy audits) to all its clients.

Besides, within this line of sustainable services, we offer clients the possibility of carrying out environmental Due Diligence studies. The company has experts on these audits focused on waste management, soil contamination, hydrogeological issues, lead, radon, etc.

Likewise, this new business line of the advisory firm also includes the ability to analyze the impact of the carbon, water, and environmental footprint, both for activities (companies) and products and/or buildings, applying the life cycle assessment approach.

Additionally, we will conduct staged diagnostic reports and prepare the necessary documentation for companies subject to NFRD to comply with their obligation, which has come into force in 2022, to disclose information in compliance with Article 8 of the European Taxonomy Regulation.

In the same way, we will also apply this same staged diagnosis model, development of corrective measures, and preparation of a final report to the creation of Environmental, Social and Governance (ESG) reports, which must be available and presented by companies employing more than 500 workers according to current regulations.

Committed to an Environmental Care Culture

This new Sustainability area complements the already existing initiatives that Gesvalt has been putting into practice within the company for several years. After the “Gesvalt Committed” initiative, where the advisory firm brings together all its CSR projects, campaigns such as “Goodbye to Plastic” have been launched. This action became a reality in 2021 when the company committed to cleaning up the seas and (in collaboration with the NGO Ocean Cleanup) helped eliminate a large number of tons of plastic from the oceans.

With the creation of a business line specializing in sustainability, Gesvalt complements the actions already carried out by the company in the field of CSR and covers care for the environment from a 360º approach, on an internal basis—raising employee awareness—and supporting the ecological transformation of clients, supporting non-profit initiatives that promote care for the planet.