This page contains all relevant information regarding ESG. What is ESG? What is ESG reporting and how do I comply with the correct legislation? ESG scores are also covered here.

ESG - Table of contents

ESG stands for Environmental, Social and Governance. In other words, sustainable business based on three pillars. ESG is the international term for corporate social responsibility (CSR) as we know it here. The rationale for ESG is derived from 17 sustainable development goals established by the United Nations. To apply ESG, the United Nations has transformed these development goals into 10 principles.

Capturing an ESG report is a big challenge. ESG metrics vary by industry, company size and complexity. Legislation also plays a role. There are several standards for preparing an ESG report.


Sustainability Accounting Standards Board

The SASB has developed an ESG framework to make it easier for companies to write a report on ESG. SASB distinguishes between sectors in their framework and differentiates the framework based on the chosen sector. This is because the focus of one sector may be different from that of another sector. The framework is not a fill-in-the-blank form, but rather a comprehensive list of topics one must write about in order to deliver a good ESG report. The ESG framework was developed in the United States and therefore also adheres to American standards.


Taskforce on Climate-related Financial Disclosures

The TCFD was designed by the Financial Stability Board in 2015 to create unity in ESG reporting. The TCFD stems from the United Nations and focuses mainly on banks, insurers and investment companies. The goal of the TCFD is to make companies in the financial sector more transparent about sustainability in order to develop a more stable and sustainable economy.


Climate Disclosure Standards Board

The CDSB was a widely used standard to create sustainability reports, however, since mid-2022 it has been consolidated into the IFRS Foundation to help with the work of the newly created International Sustainability Standards Board (ISSB). This means that the CDSB now follows the same guidelines as the TCFD and the SASB, making the CDSB redundant. The mission of the "new" IFRS Foundation remains the same: to create consistency in the way companies report on ESG.


Global Reporting Initiative

GRI is an independent international organization that supports companies in taking responsibility of the impact they make. GRI has developed the GRI Standard in order to create unity in the way in which the impact of companies is communicated. The GRI Standard consists of three series of standards: the GRI Universal Standards, which apply to all sectors. The GRI Sector Standards, which are specifically adapted to different sectors. And the GRI Topic Standards where disclosures of relevant topics can be found. The GRI Standards can be used to prepare a complete ESG report or specific topics can be used to mention on the website or a partial report.


UN Principles for Responsible Investment

The UN PRI is an international network of investors working together to implement six principles. These principles are also known as "The Principles". These principles revolve around making the implications of sustainability clear to investors.These principles are as follows:


  • Principle 1: We integrate ESG into investment analysis and decision-making processes.
  • Principle 2: We are active owners and integrate ESG into our own policies and practices.
  • Principle 3: We strive to ensure that the entities in which we invest provide appropriate disclosure on ESG issues.
  • Principle 4: We promote the acceptance and implementation of the Principles within the investment industry.
  • Principle 5: We work together to increase our effectiveness in implementing the Principles.
  • Principle 6: We each report on our activities and progress in implementing the Principles

There are many laws and regulations regarding ESG. These are mainly established at the European level. These laws mainly apply to large corporates, but because often their entire supply chain must comply with the laws, this legislation often trickles down to smaller companies. Also, in the coming years, SMEs will be increasingly involved in laws and regulations.


  • Sustainable Finance Disclosure Regulation (SFDR).
    • Applies to: Financial market participants (pension funds, investment managers, and the like)
    • Holds: Sustainability information must be made public. Investment processes must be explained, e.g. are sustainability risks taken into account? Legislation is enormously detailed and requires a lot of information. Applies always, whether you are working on sustainability or not. When offering a sustainable product, even more additional rules apply.
    • Valid since: March 2021


  • Taxonomy Regulation
    • Applies to: Financial market participants
    • Holds: common conceptual framework to unambiguously explain how to communicate about SRI.
    • Valid since: January 2022


  • Corporate Sustainability Reporting Directive (CSRD)
    • Applies to: All companies that meet at least two of the following three criteria:
      • 250 Employees or more;
      • An annual turnover of more than 40 million euros;
      • A balance sheet total of more than 20 million euros.
    • Will apply in 2026 to: listed SMEs.
    • Holds: From 2023, all non-financial performance must be reported and independently audited. Examples include CO2 emissions and social capital. This Directive is an extension of the Non-Financial Reporting Directive (NFRD). The NFRD has already been in force for several years for the largest companies in the EU. It is expected that the new CSRD will also apply to smaller companies within the EU in the coming years.
    • Valid since: The NFRD since 2014. The new CSRD as of January 2024 on the 2023 accounting year. So companies need to start documentation as early as 2023 to be compliant in 2024.


  • The European Due Dilligence Act: Please note. This law is still under consideration by the EU and not yet legally valid.
    • Applies to: Large companies, listed or otherwise high-risk SMEs, companies that operate in the financial market (pension funds, investment advisors etc) and companies that are present in a so-called high-risk sector. These companies operating in the EU must comply, even if they are not European companies themselves.
    • Holds: Publicly publish a due diligence strategy in which companies indicate how they deal with due diligence around child labor, slave trade, emissions, corruption, etc. This strategy applies to the entire supply chain of a company, both suppliers and contractors inside and outside Europe. This legislation can therefore ensure that large companies will ask small companies for certain documents to show that they comply with due dilligence. As a result, the legislation does not appear to have a major impact at first glance, but because the law applies to a company's entire supply chain, it is indeed a law with a great deal of influence.
    • Valid form: Not until 2023 at the earliest, but in all likelihood not until 2024.

An ESG score is a score given to a company based on how it performs in environmental, social and governance areas. It is often expressed numerically.

At the moment ESG scores are mainly used internally to see how the company scores on various aspects of ESG. It is not (yet) mandatory to publish an ESG score, although it is quite possible that a company that scores well will mention this on its website. ESG scoring is still relatively new, and can therefore be somewhat vulnerable. Many companies that offer ESG scoring rely on information provided by companies themselves. As a result, it is possible that there is a gap between the score and reality. A good ESG scoring consists of a mix of information from companies themselves, Natural Language Processing (NLP) and machine learning such as AI.

In addition to (new) legislation on ESG reporting, there are other reasons to invest in obtaining an ESG score. A younger investor generation is currently emerging. They tend to be more conscious and look at sustainability more often when they want to invest. An ESG score shows that you are engaged in sustainability as a company and can make you more attractive to investors.

Also, several studies show that a company that scores well on ESG is also a sustainable company that shows good numbers for many years. This is extra attractive for investors, even if they are not necessarily looking for an ESG investment. Not only investors find companies that care about sustainability interesting, also employees increasingly opt for a sustainable company.


Altijd op de hoogte blijven van ESG nieuws?