In the past, performance metrics used to measure the effectiveness and success of a company were based on a set of indicators such as financial performance, commercial and market performance, human resources performance, etc.
Today, the uncertainties linked to climate change have established a new paradigm, requiring companies to also consider the CO2 emissions generated by their activities. As a result, key policies and directives have been implemented, establishing new standards for transparency, accountability, and environmental management within the European Union.
Now, companies that do not comply with these standards (see application schedule and conditions) risk suffering negative consequences for their public image and economic performance. Additionally, non-compliance with these environmental, social, and governance (ESG) criteria can significantly impact the reputation of European companies.
Corporate actions will be evaluated based on:
- Environmental impact: Companies must report on their environmental performance, including their energy consumption, resource usage, and impact on biodiversity.
- Social responsibility: The directive requires information regarding labor practices, respect for human rights, and community engagement.
- Governance: Companies must provide information on their governance structures, particularly how they integrate sustainability into their decision-making processes.
- Loss of investor confidence: More and more investors are adopting responsible investment strategies, incorporating ESG criteria into their decisions. A tarnished reputation due to non-compliance can lead to capital flight or make access to new investments more difficult.
- Deterioration of image: Environmental or social scandals involving companies can lead to negative media coverage, damaging the brand’s reputation. Companies that fail to meet ESG expectations may be associated with poor practices, affecting their public image.
- Regulatory sanctions: In Europe, ESG regulations are becoming stricter, and non-compliant companies are exposed to fines and other legal penalties, contributing to a deterioration of their reputation and finances.
- Consumer reactions: European consumers are increasingly attentive to the social and environmental impact of the products they buy. A non-compliant company risks losing market share to competitors who are more concerned with ESG issues.