Companies without an ESG strategy will face significantly more difficulty accessing funding from banks.

A shift in strategy regarding environmental impact and social responsibility can bring significant benefits to corporations and businesses, especially in financial and economic terms. Banks are increasingly focusing on whether companies' projects are sustainable. Firms that fail to demonstrate transparency in this area may face difficulties—accessing loans will become significantly more challenging for them.

Being environmentally conscious, socially responsible, and fostering equality within the company—core elements of an ESG (Environmental, Social, and Governance) strategy—should already be standard practice. Soon, it will even become a legal requirement. Starting in 2025, all companies with more than 250 employees will be affected, and by 2027, the same will apply to publicly listed small and medium-sized enterprises. After that, it will concern all of us.

However, banks are already demanding sustainability data, specific steps, and binding commitments. And it’s not just banks. ESG strategies are also in the spotlight of large investors interested in so-called green investing and financing. It is a way to positively motivate companies to invest in renewable energy or the development of fair business practices.

It is now common—even in the Czech Republic—for companies to issue so-called green bonds. The money raised from these bonds must be invested in various ESG projects, according to clearly defined goals. Both the issuing company and the bondholders benefit. Analysts and consulting firms agree that investing in green resources can offer quick returns.

For instance, the renowned agency Bloomberg estimates that global green assets will grow significantly. By 2025, they are expected to exceed $53 trillion, driven by investor demand, government regulations, and social pressure. For companies seeking to implement ESG, this acceleration brings major challenges related to data, regulation, reporting, and impact measurement. And, not least, the creation of a meaningful ESG strategy—without which companies simply won’t survive.

The goal of ESG strategy is not only to ensure sustainable business operations. It is also about avoiding the loss of financing, which becomes a real threat for companies that fail to implement such strategies. ESG compliance also increases the chance of winning public contracts that take environmental and CSR principles into account. Companies gain a competitive advantage, as suppliers who fail to demonstrate environmental or social responsibility will face difficulties doing business with others.

Therefore, every company should be able to answer key questions about sustainability within its operations—not only basic information about their carbon footprint, but also possible ways to reduce it. Having a defined strategy for reducing emissions—in environmental, social, and governance areas—leads to improved overall company performance. Understanding these metrics leads to improvements that benefit companies, for example, through cheaper financing of their operations.

Author: Petr Michal

Published on E15.cz, March 27, 2023