The Corporate Sustainability Reporting Directive (CSRD) was passed with the aim of helping key stakeholders better evaluate the sustainability performance of companies and improving the quality of sustainability reporting in investment decision-making. Companies subject to the CSRD must report according to the European Sustainability Reporting Standards (ESRS). Among the 12 ESRS standards is G1, which covers Business Conduct. This is one of the topical standards we anticipate being material no matter what industry your company may be in.
ESRS G1 explores an organization’s culture regarding ethical behaviors, compliance with laws and regulations, and business operations and interactions. Whether or not G1 datapoints should be collected and disclosed will depend upon whether the topic has been identified as material to the company following the completion of a double materiality assessment (DMA). If identified as a material topic, then G1 business conduct information should be disclosed; however, even if it is not found to be material, the G1 standard still provides companies with a robust best practice governance framework.
Understanding G1 Business Conduct
ESRS G1 outlines the information relating to business conduct and aims to be a comprehensive standard specifying disclosure requirements that enable users of sustainability reports to understand an organization’s strategy, approach, processes, and procedures regarding its business conduct. The material topics that support transparent and sustainable business practices include:
- Corporate culture
- Management of relationships with suppliers
- Avoiding corruption and bribery
- Engagement by the undertaking to exert its political influence, including lobbying
- Protection of whistle-blowers
- Animal welfare
- Payment practices, specifically with regard to late payments to small and medium enterprises.
The objective of investigating these topics is to assess the company’s culture and approach to decision-making at the executive and management levels, and to monitor, promote, and assess the operational culture of the business. Furthermore, the assessment may reveal the company’s ability to mitigate negative impacts while maximizing positive impacts related to its business operations, as well as its ability to monitor and manage associated risks.
Reporting on ESRS G1 Standard
When adopting the ESRS G1 standard, companies can enhance their reporting process by leveraging existing frameworks that provide robust guidelines aligned with ESRS G1. This approach not only facilitates a smoother transition but also supports comprehensive reporting. A notable collaboration in this regard is between GRI and EFRAG, the standard-setting body for the CSRD, resulting in the creation of the GRI-ESRS Interoperability Index. This index enables companies already reporting to GRI standards to effectively align their reporting practices with ESRS standards.
Below are some questions for companies to consider when reporting on ESRS G1. These questions are not exhaustive but provide a guideline to ensure comprehensive reporting:
- What mechanisms do you have for identifying, reporting, and investigating concerns about unlawful behavior or behavior that contradicts your code of ethics or similar documents? Do you allow reporting from internal and/or external stakeholders?
- Do you have anti-corruption and anti-bribery policies consistent with the UN Convention Against Corruption? If not, do you have plans to implement such policies, and what is the timetable for implementation?
- What safeguards do you have in place for reporting irregularities, including whistle-blower protections?
- How do you protect your workers who refuse to act unethically, even if this refusal may result in a loss of business?
- What measures do you take to prevent retaliation against workers who have been granted whistle-blower status in accordance with applicable law, and against workers who report any unethical conduct?
- If you have no whistle-blower protection policies, do you have plans to implement them, and what is the timetable for implementation?
- Are you committed to investigating incidents such as corruption or bribery promptly, independently, and objectively?
- Do you have policies in place with respect to animal welfare, where applicable?
- What is your strategy for ethical training, including the target audience, frequency, and depth? Which departments or positions are identified as the most at risk in terms of corruption or bribery?
How Can Novata Help
Novata’s metric library includes all 1000+ ESRS data points, including ESRS G1, to support your CSRD data collection needs. Along with our industry experts and leading ESG data management platform, we can remove your operational burdens and uncertainties associated with the CSRD and position you for success in your initiatives.
By following the disclosure requirements set out in ESRS G1, companies can improve transparency, accountability, and sustainability in their operations. This fosters an ethical and responsible business environment, while also minimizing governance risks and creating sustainable value. Through addressing key questions, using existing frameworks, and emphasizing important metrics, companies can adopt a thorough and transparent approach to governance and business practices.
Need to understand if G1 Business Conduct is material to your company? Learn more about how Novata can help.
