Do you remember Alice and her many attempts to adapt to and understand the ever-changing rules of Wonderland? While the world of ESG is more structured than Lewis Carroll’s surreal vision, adventurers trying to grasp its principles might feel just as lost and helpless as the book’s protagonist. The implementation of the CSRD directive, expanding the obligation of non-financial reporting to a significant portion of companies, is a true game-changer on the path to achieving ambitious sustainability goals. Even if the reporting requirement doesn’t directly apply to us, sooner or later, nearly every business will be swept up in the wave of changes aimed at building a sustainable, safe, and friendly future. The snowball is already rolling, so it’s worth preparing today for the new rules, as the stakes are high—both on a global scale and in the context of competitive positioning, development, and the success of our businesses.

Chasing the Eco-Rabbit

ESG stands for Environmental, Social, and Corporate Governance, a concept encompassing issues related to environmental care, social responsibility, and corporate governance in the context of sustainable business operations with the highest respect for these elements. Although the topic has been trending since the CSRD (Corporate Sustainability Reporting Directive) came into force on January 5, 2023, as part of the European Green Deal, it is far from new. Back in 2004, the United Nations Global Compact introduced the ESG acronym in a report aptly titled “Who Cares Wins,” highlighting the long-term benefits of incorporating ESG factors for businesses’ competitiveness and financial results. Further impetus came in 2015 with the UN’s adoption of 17 Sustainable Development Goals and the EU’s legislative package, “Fit for 55,” aimed at systematic regulatory changes to meet climate objectives.

The overarching goal (the “climate white rabbit”) is to reduce greenhouse gas emissions in the EU by at least 55% by 2030 (compared to 1990 levels) and achieve full climate neutrality by 2050. These are lofty ambitions, and the chase is full of strategic challenges.

ESG as an Evolution of CSR

We’re not starting from scratch—ESG is, in some ways, an evolution of the long-established CSR (Corporate Social Responsibility) concept, a voluntary management strategy focusing on social responsibility, already familiar and incorporated into many organizations’ policies. While CSR emphasizes ethical practices and corporate activities, especially in social contexts, ESG adopts a more comprehensive approach, incorporating environmental and governance dimensions.

Unlike CSR, ESG reporting is formalized and verified by external auditors, preventing overinterpretation, misuse, or greenwashing—misrepresenting sustainability efforts to improve image without meeting real standards.

Formalizing ESG: CSRD and ESRS

The CSRD and ESRS (European Sustainability Reporting Standards) elevate ESG reporting to the level of financial reporting. For many entities, ESG reports will become mandatory, transparent, and externally verified. This regulation will be reflected in accounting laws, compelling companies to adjust reporting procedures and ensure transparency in their ESG activities. Stakeholders—including investors, customers, business partners, contractors, and local communities—will gain deeper insights into companies’ sustainable development and responsible management efforts.

A Gradual Shift: Proportionality in Action

Thankfully, the EU is not the Mad Hatter, and the reporting obligation is being introduced gradually. Large entities, already subject to the NFRD directive, will file reports under the new rules for the current fiscal year. By 2025, all large companies meeting two out of three criteria (over 250 employees, a balance sheet exceeding €25 million, or annual revenue above €50 million) will need to report, and by 2026, small and medium-sized enterprises classified as public interest entities will follow suit.

Even if a business isn’t in these groups, ignoring ESG could risk losing competitiveness and growth opportunities. The ESG reporting system is interconnected—if a business within the value chain of a reporting entity fails to meet standards, it could impact the report, leading to potential loss of partnerships, financing opportunities, or reputational damage.

The Domino Effect in Business Relationships

ESG reporting is like dominoes—each piece activates the next. Entities not meeting ESG standards risk exclusion from the market. This dynamic is evident in industries such as finance, where banks seek green projects and partners to comply with their own ESG obligations. Similarly, hotel chains, including those operating under franchises like Accor, emphasize educating partners on sustainability as a value-added benefit.

In sectors like corporate and MICE (Meetings, Incentives, Conferences, and Exhibitions), implementing ESG strategies is becoming crucial. Businesses increasingly consider sustainability and social responsibility when choosing venues, favoring hotels that align with these principles.

Individual Guests and ESG Awareness

While individual guests aren’t bound by formal ESG guidelines, their awareness is growing. Many prioritize hotels that show commitment to sustainability, environmental care, and ethical practices. Even booking platforms like Booking.com have introduced badges for properties with sustainability certifications.

Navigating the ESG Maze

The sheer volume of regulations, directives, standards, and best practices in ESG can feel overwhelming, akin to Alice’s tumble down the rabbit hole. However, with time, the seeming chaos reveals its structure. Gradual familiarization with ESG aspects and leveraging external expertise can help seamlessly integrate ESG into business strategies.

Procrastination risks chaos and missed opportunities. Thoughtless, last-minute decisions may prove costly, yielding little benefit. Successful ESG implementation requires deliberate strategy, aligned with the business’s unique potential and operations.

Leadership and Commitment: The Key to ESG Success

The process’s success hinges on management’s commitment and genuine desire to embrace sustainable practices—not merely a compliance obligation. Comprehensive analysis of the current state, internal and external dialogue, and meaningful, measurable goals are critical to embedding ESG as an integral part of business processes.

The Long Game

This year marks the 20th anniversary of the ESG concept. Over two decades, it has evolved into a formal framework shaping the future of business. While most hotels in Poland won’t face mandatory reporting, ESG will influence market dynamics, competitiveness, and growth potential. Simplified non-financial reporting standards are being developed for entities voluntarily pursuing ESG certification.

Despite efforts, the 55% emissions reduction target by 2030 is unlikely to be achieved, underscoring the need for a concerted and systematic approach to ESG.

Unlike Wonderland’s chaotic bird race, this is a structured pursuit where clear strategies determine success.

Magdalena Konaszewska & Katarzyna Romanowska
Hotel Professionals, Hotel Professionals Management Group, NextCare Technology Solutions