The business world is changing rapidly, and in it, ESG is central. Environmental, Social and Governance are no longer separate concepts but form an integrated framework that gives direction on how organizations can future-proof themselves. In this article, we explain in plain language what ESG exactly means, which legal frameworks are relevant, and how organizations can get started with it in practical terms. We also discuss the opportunities that ESG offers and give you practical tools to get started right away.
ESG in brief
ESG stands for Environmental, Social and Governance. In other words, Environmental, Social and Governance. This framework helps organizations identify and improve their sustainability and social impact. You can think of ESG as a further development of Corporate Social Responsibility (CSR) and People Planet Profit (3 p’s), but with a more structured approach and international scope that better fits today’s business context.
The three pillars of ESG
- Environmental (E): This pillar focuses on how an organization affects the environment and how ecological issues affect the organization. Here you look at concrete aspects such as CO2 emissions, climate impact, energy consumption, water use, biodiversity, waste management and the sustainability of supply chains.
- Social (S): This pillar is about how an organization treats people – both internally and externally. Key focus areas include working conditions, diversity, equality and inclusion, human rights in the supply chain, data privacy and contribution to the communities in which you operate.
- Governance (G): : This pillar concerns internal operations and governance. Here the focus is on transparency, honest reporting, ethical governance, diversity in leadership positions, anti-corruption, risk management and responsible remuneration structures.
Why ESG has become so important
ESG has evolved from an optional area of focus to an essential part of corporate strategy. This evolution stems from several factors:
- Increase sales: Sustainability makes your business more attractive to B2B and B2C customers, leads to a higher retention rate and gives a better conversion from prospect to customer. Also, sustainability gives the opportunity to charge premium prices for sustainable products (source including Mc Kinsey).
- Cost reduction: ESG contributes to more efficient production and reduced costs through employee turnover. It creates production improvements through higher innovation and reduces marketing costs through authentic sustainable positioning.
- Increasing regulation: Europe has passed a lot of legislation recently that requires organizations to measure, report on and improve performance of their ESG performance. Examples include the CSRD and the CSDD.
- Changing investment criteria: Financiers and investors are increasingly incorporating ESG criteria into their decision-making, recognizing that companies with solid ESG performance often perform better over the long term.
- Higher stakeholder expectations: Customers, employees and partners increasingly expect organizations to take responsibility for their social and environmental footprint.
- Higher innovation rate: companies with good ESG policies have significantly higher innovation rates. This is partly because a forward-looking vision. See , among others, research by Vishwanathan
- Risk and opportunity management: Good ESG policies help organizations identify and mitigate climate-related risks (think flood risk). It also provides opportunities, such as saving on energy costs and better access to talent. All of this leads to better resilience and more future-proof operations.
ESG legislation: what do you need to know?
For many organizations, ESG is not optional. Key European legislation to watch out for:
Corporate Sustainability Reporting Directive (CSRD).
The CSRD establishes reporting requirements for larger organizations on their impact on environmental and social issues. It applies to companies that meet certain criteria around number of employees, annual turnover and balance sheet total. With the recent Omnibus I amendments (2025), implementation deadlines have been adjusted and there is more focus on proportionality, allowing organizations to report more effectively.
Corporate Sustainability Due Diligence Directive (CSDDD).
The CSDDD requires companies to carry out careful research(due diligence) in their value chains to identify and address human rights or environmental abuses. What makes the CSDDD special is that it calls not just for reporting but for concrete action, including a climate transition plan consistent with the Paris Climate Agreement. Again, Omnibus I has provided a more focused approach.
European Clean Industrial Deal
The European Commission launched the European Clean Industrial Deal in 2025, an ambitious plan to make Europe more competitive and sustainable. This initiative, along with changes to the EU Taxonomy and other regulations, should increase investment in electrification, lower energy costs and accelerate the transition to circular products and sustainable materials.
From compliance to value creation: ESG as an opportunity
While legislation is a key driver, ESG offers much more than just compliance. By integrating ESG into your business strategy, you can make real social impact as well as create value for your organization and the world in which it operates.
A strong ESG strategy leads to better sustainability performance and better risk management. Companies with strong ESG performance have access to more capital on better terms and build stronger relationships with their stakeholders. ESG challenges can also drive innovative solutions and cost savings, while a strong ESG positioning strengthens your brand image and attracts talent.
Implementing ESG: practical tools for success
Implementing ESG means future-proofing your organization. And that doesn’t have to be complicated. With these practical tips, you can start making your organization more sustainable tomorrow.
Start with what really matters
Start with a materiality analysis to determine which ESG topics are most relevant to your organization. This focus ensures that you focus your energy on areas where you can actually make an impact and that are important to your stakeholders. This will prevent your efforts from being scattered over too many topics.
Integrate ESG into existing business processes
Don’t treat ESG as a stand-alone project, but interweave it with your current business processes. Link ESG goals to existing KPIs and make it part of regular meetings and decision-making. By integrating sustainability into procurement, product design and risk management, it becomes natural in your day-to-day operations.
Create ownership at all levels
ESG success requires involvement from across the organization. Assemble a cross-functional team and make specific individuals responsible for relevant ESG goals. Ensure visible commitment from the board while encouraging bottom-up initiatives.
Measure, evaluate and improve continuously
Start by collecting baseline data, set measurable goals and monitor your progress. Celebrate successes, but also be transparent about challenges. Regular evaluation and adjustment will keep your ESG strategy relevant and effective.
Want to learn more about applying ESG in your organization? Find out how our guide helps organizations make a real impact.