Business
Understanding ESG: Why it matters for finance and procurement
As COP29 takes centre stage this week with businesses seeking guidance on climate finance and greener principles, finance and procurement leaders must support business growth, prioritise sustainability and reduce risk – while meeting rising expectations from regulators, customers and employees.
ESG: How important is it for finance and procurement
Moving from the periphery to the core of business strategy, finance and procurement play a crucial role in creating and managing sustainability with transparency and accountability. These leaders are critical in ensuring ESG strategies are embedded and actively drive positive business outcomes.
By focusing on ESG, businesses are better equipped to navigate environmental risks and supply chain disruptions as those committed to ESG are often more adaptable and better positioned to thrive in uncertain environments.
Meeting regulatory demand and avoiding penalties
In the UK and Europe, regulatory reporting requirements for businesses of all sizes are set to become tighter and more extensive. According to the Corporate Sustainability Reporting, Directive (CSRD), businesses must follow the following implementation dates to remain compliant:
For large companies already subject to the Non-Financial Reporting Directive (NFRD):
- The first CSRD-compliant annual report is due in 2025, with the CSRD applying from the 2024 financial year
For large companies not subject to the NFRD:
- The first CSRD-compliant annual report is due in 2026, with the CSRD applying from the 2025 financial year
Listed small and medium-sized enterprises (SMEs):
- The first CSRD-compliant annual report is due in 2027, with the CSRD applying from the 2026 financial year
Non-EU companies with significant EU business:
- The CSRD applies from the 2028 financial year
Responding to customer and employee expectations
All stakeholders – from customers and employees to suppliers, investors and shareholders – are placing more emphasis on corporate responsibility than ever before, supporting businesses that align with their values. Ensuring ESG principles are reflected in everyday operations and communicated clearly is key to building stronger relationships.
Improved efficiency and long-term growth
ESG is about more than meeting regulatory requirements — it’s a strategic move that should lead to tangible business benefits. Focusing on sustainability and stronger governance often results in efficiency gains, lower operational risk and more robust supply chains.
Finance and procurement leaders are essential in driving this change. Their involvement ensures ESG principles are applied across every area of the business, helping to create long-term value that extends beyond financial metrics.
Strategically approaching ESG
Through carbon offsetting, businesses can fund projects to reduce or remove greenhouse gases from the atmosphere, while carbon insetting encourages businesses to implement carbon reduction initiatives (i.e. switching to renewable energy sources) within a company’s supply chain.
For finance and procurement, ESG fosters a culture of responsibility, resilience and innovation that strengthens businesses from within. By tracking and managing carbon emissions, businesses can unlock efficiencies, reduce risk and drive long-term success.
