Author: Oleksandr Fedoryshyn, Managing Partner at F&P
According to a study by the Centre for Economic Recovery, about 40% of Ukrainian companies are already integrating ESG into their operations, and more than 60% of managers consider ESG implementation important for the success of their business. Modern business can no longer exist in a vacuum, ignoring environmental, social and corporate governance issues. How can Ukrainian companies increase their competitiveness and remain relevant in the global economic environment? Let’s learn more about the concept of Environmental, Social, Governance and its implementation in Ukraine.
ESG: why is it important for Ukraine?
ESG (Environmental, Social, Governance) is a concept that encompasses the environmental, social and governance aspects of a company’s operations. It determines the extent to which a business complies with the principles of sustainable development and social responsibility. Here’s what the main components include:
- Environmental aspect (E). This includes reducing environmental impact, energy efficiency, waste and emissions management, and biodiversity protection. Current challenges for Ukraine are the impact of agriculture on soil and water resources, as well as the effects of pollution due to military operations.
- Social aspect (S). It covers relations with employees, customers, suppliers and local communities, as well as issues of occupational safety, human rights, gender equality and personal data protection. An additional challenge is the social responsibility of business to rebuild war-affected communities, as well as support for veterans and IDPs.
- Governance aspect (G). It concerns corporate governance, transparency, ethics and anti-corruption. An independent supervisory board, transparent decision-making procedures, and effective internal controls are key elements of good governance.
International organisations, investors, and donors analyse potential partners by ESG factors. Obviously, this gives them the opportunity to assess the transparency and reliability of organisations. This is the foundation for building trust. That is why businesses aiming for long-term growth in the market should implement the ESG concept.
What are the business benefits of ESG?
Strategically, the concept serves as an additional tool for attracting investment from international partners. This is one of the key areas for Ukraine’s economic recovery after the end of the war.
Another important factor is access to European markets. The EU is actively implementing ESG standards. Among the well-known initiatives: Green Deal and the Sustainable Finance Taxonomy. To remain competitive, businesses need to adapt to these conditions.
Ultimately, ESG practices help to increase business efficiency, reduce risks and improve reputation. Companies that care about the environment and society have an advantage in attracting talented employees and loyal customers.
Sustainable development through ESG: practical steps for business
To effectively implement ESG principles in business processes, you need to:
- Conduct an audit of the environmental and social impact of the business.
- Identify key areas for improvement and develop an ESG strategy.
- Ensure transparency of corporate governance and compliance with ethical standards.
We recommend engaging legal expertise to achieve compliance with ESG requirements and mitigate legal risks.
Sustainable development at the level of the state strategy
Ukrainian legislation enshrines the concept of sustainable development in several key documents:
- The Sustainable Development Goals of Ukraine until 2030 (adopted in 2019). They help to develop government programmes and laws aimed at balancing the economy, social sphere and environment.
- Targets and indicators for achieving the goals (approved in 2024). They cover all three ESG pillars, and their implementation means gradual integration of this concept into government and business strategies.
- The National Economic Strategy until 2030 (adopted in 2021), which takes into account sustainable development goals.
- The Strategy for the Implementation of Sustainability Reporting (adopted in 2024). It stipulates that companies should publish information not only on financial results, but also on environmental, social and governance impact. Starting from 2025, such reporting will be in line with European standards (ESRS).
Legislation already provides for certain reporting requirements for large companies. For example, the Law of Ukraine ‘On Accounting and Financial Reporting in Ukraine’ requires large enterprises to prepare and publish a management report. It must contain both financial and non-financial information about the business.
State-owned companies also have to report on their environmental impact, social issues and corruption risks in accordance with international OECD standards. And starting in 2025, Ukraine is planning to introduce sustainability standards similar to those in Europe. Therefore, large companies, and later medium-sized ones, will be required to publish non-financial reports. They will help investors and partners assess the sustainability and responsibility of the business.
Conclusions
Implementing ESG is a strategic necessity for modern business. Companies that operate according to these principles increase their own competitiveness, as well as create a positive impact on society and improve the environment. This is a situation where the need to achieve business goals at the same time helps to improve reputation and the world around us. So it’s time to adapt to the new standards, reduce risks and build a sustainable business.
