ESG education is crucial for companies preparing for sustainabillity regulation in the CEE+ region

ESG is becoming more and more significant in companies’ operations, thus enterprises should look for sustainability solutions and integrate them into corporate decisions. Regulatory and market trends show the growing importance of ESG reporting. 20% of responding CEE+ companies have prepared ESG (environment, social, governance) another 40% are planning shortly, according to regional research by BDO.

The research led by BDO Hungary involved a total of 9 countries’ BDO firms and aimed to assess and overview what initiatives and measures companies in the Central-Eastern European region have taken in the area of sustainability.

About the research

Information was collected from BDO clients on their involvement, attitudes, and challenges towards sustainability. The research was carried out using a questionnaire methodology and more than 5500 companies received the online survey.





ESG matters
83% of companies who completed the questionnaire think that ESG will be extremely or very important in the future for their business operation.

The motivation to integrate sustainability considerations into corporate decision-making varies. The most common incentive is regulatory requirements since regulations from the EU and national governments are placing a growing demand on companies to make their operations sustainable. Enhancing reputation, and ownership expectations were among the three main motivating factors. On top of that, stakeholders’ expectations are also important, already third of the respondents were requested to share sustainability-related data, or information in the last 12 months. Most of the data requests came from banks.

Companies willing to spend more on sustainability in 2024

More than 40% of responding companies would like to spend more on sustainability, while half of them answered (52%) that they would be spending the same amount as the previous year. The amount of costs and investments companies channel to their ESG transformation varies depending on their size, and industry. 77% of the companies were focusing their investments on energy efficiency and green energy transformation. 18% of the firms devoted and concentrated on gathering sustainable data.

Green financing on the horizon

Green financing will be an increasing opportunity for regional companies. 15% of the companies surveyed had already used green or sustainable financing in the last 2 years. Those firms that have taken advantage of green financing (80%) plan to utilize green or sustainable financing in the next 12 months as well. Looking forward, nearly double as many large corporations as before aim to employ sustainable and green finance in the next 12 months.

 Companies are still at a starting level on their sustainability journey 

Using the BDO Global concept, we have analysed five ESG maturity stages:

1. Activating: Companies begin to activate their efforts related to ESG factors.
2. Compliance: focus on minimum legal requirement compliance.
3. Proactive: Companies proactively manage ESG factors.
4. Strategic: ESG becomes a strategic priority for the company.
5. Purpose-Driven: ESG is the main business mission for the company.

BDO’s Sustainability Integration Roadmap

The integration of ESG criteria into the decision-making process and reporting is still not widespread among companies for several reasons. As revealed by the survey, the lack of capacity, the lack of information about reporting and complex, time-consuming methodologies hinder companies to focus on these issues.

There is a difference in how SMEs and large corporates integrate ESG measures into their operations.  While only 17% of SMEs indicate that they are highly or extremely highly focused on carbon emissions and carbon neutrality, half of the large enterprises are already focusing on these issues. Interestingly it seems in social matters SMEs are more motivated as SMEs ranked employee well-being 8% more vital, education and training 15% more important, and human rights in the value chain 15% more important than large organizations. Governance is a large corporate topic, the research showed that they put more emphasis on ethical behaviour and transparency than small- and medium-sized companies.

It's getting more crucial to report on ESG

The survey results reveal that only 20% of responding CEE+ companies have prepared ESG reports, 65% of them annually, and nearly two-thirds of these reports are disclosed. More than 40% of companies do not plan to report on ESG, with two-thirds of SMEs and one-third of large companies. Another nearly 40% are planning to prepare their first ESG report soon, with no significant difference between SMEs and large companies.

New sustainability regulation, low preparedness

Corporate Sustainability Reporting Directive (CSRD) ensures that companies disclose adequate information about their sustainability risks and opportunities and their impact on people and the environment, based on a dual materiality principle. The CSRD requires companies by law to apply standards to meet the legal obligations on sustainable reporting. The European Commission adopted common standards in line with the CSRD. The European Sustainable Reporting Standards (ESRS) are mandatory for companies subject to the directive.

CEE+ companies are not yet prepared for the legislation, the survey suggests that there is a lack of information.  A surprising finding was that while one-third of the companies answered that they think they are obliged to report according to the new regulation, in reality, more than 40% of them are legally obliged to report in line with the CSRD when looking at their financial numbers. The research also highlighted that the CSRD and ESRS readiness of companies is highly dependent on whether they have previously reported on sustainability. Only 20% of companies that report on sustainability have not heard of ESRS. In comparison, 50% of companies that do not report on sustainability are not aware of ESRS, of which 34% would be legally required to do so.

Takeaway for companies

1. Be aware: new regulations are here or coming that focus on sustainability,
2. Be informed: check whether the regulations have a direct or indirect effect on your operations,
3. Be prepared: think ahead and start your preparation early as these tasks are complex, time-consuming,
4. Be smart: strategic thinking is needed to ensure you stay ahead of your competitors and maintain business resilience.