Businesses and their suppliers are grappling with more stringent requirements on reporting and disclosure in a resource-constrained environment.
The implementation of ESG practices and regulations in Romania has gained importance, particularly after the adoption of the CSR Directive in 2022 (implemented in the Romanian national law) and of the Corporate Sustainability Due Diligence Directive (CSDDD) in April 2024 but the EU Parliament. While the private sector acknowledges the importance of sustainability and corporate responsibility, there are varying levels of preparedness.
The companies directly impacted by the CSR Directive are taking measures to ensure compliance, and these measures impact their value and supply chains. The CSR Directive will have a domino effect, and this has already started to affect the day-to-day business of companies that are obliged to publish a sustainability report. Suppliers are asked to provide data or certifications attesting to their commitment to ESG, their carbon footprint, or internal environmental and corporate governance policies.
While some companies have proactively embraced ESG practices, recognizing their potential long-term benefits, others may find compliance challenging due to limited resources or lack of awareness. The new legislative changes proposed by the EU Commission related to greenwashing, ESG, environmental crime, and green claims have sparked discussions within the business community. Some view these changes as an opportunity to enhance their ESG performance, potentially reaping significant rewards in the future. The private sector’s response is a mix of interest and cautious optimism.
ESG considerations have-growing importance within the legal field. Lawyers must actively address the increase in ESG initiatives and help clients tailor strategies, policies, contractual clauses, and risk assessments that cover a diverse spectrum of sustainability and ethical aspects.
The EU Green Deal and new sectoral proposals for energy efficiency and green public procurement influence the activity of the companies in many ways, including investments.
The CSR Directive and the CSDDD will influence investment decisions significantly. Investors increasingly consider ESG factors when allocating capital. Companies know that aligning with these regulations may attract more sustainable investments, while non-compliant entities could face challenges. In the past, ESG was regarded more as a PR exercise but now it is seen as a serious and complex matter and, if ignored, may affect the company’s future. The time has passed when companies undertook minor changes and marketed them as significant sustainability efforts. True commitment requires systemic changes.
Governments, consumers, and industry competitors will no longer turn a blind eye toward vague or misleading green claims that overstate the environmental benefits of products and services provided by the companies. Companies that withhold information about their supply chain, sourcing practices, or environmental impact will raise more suspicion from investors and consumers.
In terms of the workforce, ESG practices impact talent acquisition and retention. Companies that prioritize ESG initiatives are more likely to attract skilled professionals. Boards and senior management will need to adapt their decision-making processes and integrate ESG considerations into strategic planning, risk assessments, and performance evaluations.
Companies face many challenges when it comes to ESG, and these are mainly related to behavioral and mindset change, resources, data collection, and reporting. Small companies may struggle to allocate resources for ESG initiatives as implementing sustainable practices requires financial investments, skilled personnel, and time. Finding cost-effective ways to integrate ESG into a company’s current operations is a big challenge. The sustainability reporting process is complex and involves lengthy monitorization, data collection, verification, and robust metrics.
As awareness grows, EU and national regulations will likely become more stringent. Companies must stay up to date with the latest legislative proposals and strategies to anticipate continuous updates and adapt accordingly. The expectations from stakeholders will be higher as clients, banks, consumers, investors, and employees will demand greater accountability.
Companies that embrace ESG as part of their core strategy will be better positioned to thrive in a sustainable future. Businesses have realized that allocating resources for ESG measures and strategies in the present will reduce future spending to mitigate risks and maintain a good reputation.
Recognizing our responsibility toward future generations, and embracing a shift in mindset is crucial when it comes to ESG considerations.