ESG is here and is here to stay

Everyone has heard about the United Nations SDGs, the Sustainability Development Goals. Far fewer have heard about ‘ESG’, the abbreviation used for the overarching sustainability concept consisting of the three pillars Environmental (E), Social (S) and Governance (G) to achieve these very important goals. Or have heard about ‘CSRD’ (Corporate Social Reporting Directives), the new European legislation that requires companies to demonstrate they have an ESG policy in place to become (more) sustainable. That ESG will play an increasingly important role the coming years - and the fact that the impact will be significant - does not yet seem to be common knowledge. Nor does the urgency seem to be getting through to everyone.

Practical examples

Let’s start with a few practical examples to illustrate the above. Suppose a large international conference takes place. Participants are from corporate organisations and come from all over the world.

Are women and men having equal career opportunities within the organising company?

For those working at multinationals that must comply with the CSRD, it will be important to know whether this conference is sustainable. For instance, from an environmental perspective, does the conference venue try to minimise single-use plastics and other types of waste. Is energy for heating and cooling green energy from climate-neutral sources. From a social point of view, are women and men having equal career opportunities within the organising company. In addition, the CSRD requires companies to be transparent about what they do, how they do it and if they properly run their business. Simply put, managing the company correctly means working with integrity and being accountable, which implies the ‘G’ of governance.

Congress venues

Congress venues such as RAI Amsterdam are focusing on and committed to be compliant with ESG policies. Not only in the 'environmental' scope but also in the other two pillars, ‘social’ and ‘governance’. But what if the congress takes place in the Middle East or Far East? Questions about human rights then quickly arise. Environmental issues also pop up. Is it justifiable to travel to Bali where every effort is being made to supply water to the golf courses, while the population is forced to buy bottled water due to lack of desalinated water. Is it acceptable to organise a congress in a location where many people died during the construction of the venue or where labourers are still systematically abused?

Is it justifiable to organise an event in a city where human rights of the lhbtiq+ community are under severe pressure?

Sustainability issues also come into play closer to home. Is it still justifiable to organise an event in the Alps, where energy-guzzling machines ensure enough snow for skiing outings. Or in a city where human rights of the lhbtiq+ community are under severe pressure such as in several European countries? These questions will come up when organising conferences to certain destinations.

Western countries

Hence, ESG issues will also impact the conference industry. On the one hand, conference participants from Western countries will increasingly demand that congresses comply with various aspects of ESG. On the other hand, destinations where ESG is under pressure, whichever of the three pillars, will see a decline in international congresses or at least in participants from Western countries. Consequently, this also affects PCO’s and other companies involved in the organisation. In other words, the conference market will change, no doubt about is. And in Europe at least, will require sustainability.

Double materiality

What does ESG mean for the conference industry and what are important things to consider as an organisation? It's about having a clear picture of how the environment affects your business (outside-in) and, conversely, how you as a business affect the environment (inside-out). The former is called financial materiality. Think of the huge labour shortage driving up costs. But also increased energy costs and maintaining mandatory energy labels. In addition, as a company, you need to know what your impact is on the environment. The conference area being inaccessible due to a congress has impact on the neighbourhood. The amount of waste caused by dismantling stands has an adverse impact on the environment. This is called impact materiality. Together, this is called double materiality. So, it is about knowing what kind of impact you have on stakeholders and what you may experience from them. Therefore, it is important to have a good idea of who your stakeholders are. Apart from sentient creatures also nature is a stakeholder. While animals and nature cannot safeguard their own interests, numerous others, individuals and organisations, can and do.

Non-financial Reporting

Up from 2024 ESG and CSRD will firstly apply to large, listed companies. This means that in addition to mandatory financial reporting, a non-financial reporting will be imperative according to European Sustainability Reporting Standards (ESRS). ESRD consists of two general overarching standards plus ten theme-specific standards. These specific standards are again divided into environmental (5), social (4) and governance (1) standards.

Clients who are liable for CSRD will require that you also have an ESG policy in place

Without going into too much detail, a brief and incomplete account of the various components. The environmental standards address climate, biodiversity and circularity. The social standards focus on employees, both own and those in the chain, but equally on consumers and society. The governance standard covers business conduct. In subsequent years, smaller companies – also to those working in the conference industry – will be required to start having ESG policies and comply with the CSRD. There might be companies exempted from this mandatory reporting. Legally. Socially and economically, however, they will not. This needs a bit of explication.

Social perspective

First, the social perspective of ESG policies. This has to do with a change in mentality and behaviour. A simple comparison: ten years ago, hardly anyone drank coffee with soy milk, or ate vegetarian, let alone vegan. Today, eating meat on a daily base is becoming increasingly unusual, even unacceptable for some. It will be the same with ESG. More and more, it will become a social demand to work in a sustainably manner. Gen-Z looks for purpose: the companies they want to work for will have to match that. It also will be an economic argument to employ Gen-Z. Customers, conference attendees, investors and banks will increasingly demand this as well.

Chain liability

Moreover, and this is where another not yet mentioned important aspect comes in, you will have to deal with ‘chain liability’. This means that clients who are liable for CSRD will require that you also have an ESG policy in place for them to stay ESG compliant. Not having a ESG policy is the recipe to eventually lose your client. And this can happen very soon. And lastly, to get your financial reporting approved your accountants will encourage you to be ESG compliant. If your company does not meet the CSRD requirements, an approved accountancy statement will be at stake. And that will scare off investors and banks.

Start simple

ESG policy and CSRD are comprehensive and quite complex. Don't let this put you off. Start simple and keep it concrete. Our advice: 1) map out where your company stands on ESG; 2) formulate where you want and need to be in three years - link this to your corporate philosophy. Important: what you want to do entails your purpose and what you need to do implies legal requirements;

Make ESG part of your strategy and place final responsibility at board level

3) prioritise and make a roadmap. Make ESG part of your strategy and place final responsibility at board level. Appoint an ESG manager, form an ESG team and involve the rest of the organisation. If your company is too small, find allies. Or concentrate on sub-aspects, e.g. the 'E' of ESG and enlist the help of others on the other two pillars.

Competitive advantage

To conclude, it seems like this is an extra burden for businesses. That is not how we, and now many companies, see it. Rather, it is a huge opportunity and if you are a forerunner, also a competitive advantage. The challenges are certainly there, and we do not want to downplay them. But starting early prevents a lot of stress, can unleash new energy and delivers engagement with employees, customers, congressmen, the neighbourhood and so on. Remember, ESG is here and is here to stay. Better act than react when it is too late.