For companies, ESG is becoming an increasingly important topic. Where sustainability and social responsibility were long mainly reputation or marketing issues, recent (European) developments have made ESG increasingly a legal matter. Companies are faced with new reporting obligations, supply chain transparency requirements, and supervisory measures.
This blog series discusses the main developments in the field of ESG and their consequences for companies.
The terms sustainability, corporate social responsibility (CSR), and ESG are often used interchangeably but differ in focus.
ESG stands for Environmental, Social and Governance and encompasses the three pillars on which companies are assessed:
ESG is an internationally used term, especially within the financial sector, where these criteria are applied to make non-financial performance measurable. The Dutch term “maatschappelijk verantwoord ondernemen” (CSR) has a similar meaning but is less strictly defined. Both approaches boil down to the same principle: companies have not only a profit objective but also a social responsibility.
Where corporate social responsibility used to be mainly voluntary, this has changed significantly in recent decades. Many companies supported social initiatives, but ESG was rarely part of the core strategy. That is now fundamentally different.
Since the 1980s, (international) environmental legislation has expanded rapidly. The European Union has played a central role in this. An important milestone was the presentation of the European Green Deal in 2019, aiming for a climate-neutral EU by 2050. This policy agenda has led to extensive legislation that directly affects companies, such as:
These and other measures mark a clear shift: ESG is no longer a choice but a legal framework within which companies must operate.
ESG has not only a legal but also a strategic dimension. Companies are increasingly assessed on their ESG performance by investors, customers, and supply chain partners. Many large companies now apply a supplier code of conduct, passing ESG obligations on to their suppliers.
In addition, attention from regulators is increasing, particularly regarding misleading sustainability claims (greenwashing). Both the Netherlands Authority for Consumers and Markets (ACM) and the European Commission have issued guidelines and sanction regimes to combat deception.
The development of ESG shows that social responsibility is increasingly anchored in law. Companies would do well to align their sustainability policies in time with the growing European obligations and transparency requirements.
It is important not only to comply with the letter of the law but also to structurally integrate ESG into business strategy and governance. This requires a multidisciplinary approach: legal, strategic, and operational.
Do you have questions about ESG or sustainability? Then contact Sonja Geldermans, Corporate Law attorney.
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