“ Businesses should approach ESG as an opportunity rather than a challenge. This report highlights the significant advantages of a well-implemented ESG strategy, from strengthening resilience to market risks to meeting the expectations of socially conscious consumers.”

John Duffy, Audit Partner

How effective ESG reporting can drive growth

In today's business landscape, Environmental, Social, and Governance (ESG) reporting has become more than another compliance exercise. For growth-oriented businesses, it is a strategic imperative as companies that embrace ESG practices and report them transparently are increasingly rewarded by investors, consumers, and regulators alike.

The business environment has shifted significantly in recent years. What was once a niche focus for socially responsible investors has now become a mainstream driver of corporate value.

A report from Bloomberg Intelligence estimates that global ESG assets surpassed $30 trillion in 2022 and areprojected to exceed $40 trillion by 2030, representing more than a quarter of the expected $140 trillion assets under management (AUM).

Drawing on HLB's expertise and insights from industry sources and specialised conferences within our network like the recent HLB Advisory, Tax and Audit Conference 2024 held in Prague, Czechia, this whitepaper explores how adopting best practices in ESG reporting can position companies for sustained growth. It also highlights how businesses of all sizes can harness ESG to gain a competitive advantage, achieve financial success, and navigate the challenges that come with it.

The challenge: Complexity and uncertainty in ESG adoption

As the case for ESG grows stronger, corporate leaders are confronted with an array of challenges in adopting and reporting on these standards. On the one hand, pressure from investors, regulators, and consumers to showcase robust ESG credentials is mounting. On the other, many businesses remain unsure of the direct benefits or are wary of the costs associated with meeting increasingly stringent requirements.

Navigating an evolving regulatory landscape, integrating climate-related financial risks into corporate disclosures, managing compliance costs, and communicating ESG performance to an increasingly discerning audience have become formidable tasks.

While large corporations are the first to face the heightened regulatory demands, small and medium-sized enterprises (SMEs) are not immune. Many SMEs are hampered by limited resources, knowledge gaps, and a reluctance to venture beyond basic compliance. Yet, as regulatory pressures intensify and consumer expectations evolve, the cost of inertia is rising even for them.

Breaking the status quo

With over 99% of European businesses classified as SMEs, the influence of CSRD will be felt across the board. Even companies not directly covered by the directive will soon find themselves needing to adopt ESG reporting practices to stay competitive and compliant.

A major obstacle is the fear of risk—whether from accusations of greenwashing, negative profiling, or potential missteps. This apprehension often leads businesses to avoid ESG initiatives, but this avoidance only exacerbates the risks. 

Rather than perceiving ESG as a burden, businesses should recognise it as a strategic asset. While the risks of failing to properly implement ESG are tangible, the benefits of doing so are considerable. When effectively integrated, ESG can bolster a company's market position, attracting consumers, investors, and partners who are progressively prioritising sustainability.

HLB: Strategic ESG guidance for growth and compliance

For advisors, the evolving field of ESG presents a vital opportunity to guide clients through its complexities. By developing effective ESG strategies, managing risks, and identifying new market opportunities, advisors can enhance client relationships and solidify their role as trusted partners. HLB is uniquely positioned to help clients embed ESG into their core strategies, providing expert guidance on reporting, compliance, risk management, and sustainability initiatives.