ESG: From Regulation to Innovation

Portugal’s ESG approach to sustainable development and corporate excellence

In recent years, environmental, social and governance (ESG) criteria have become key to assessing the sustainability and ethical impact of a company’s operations. The framework goes beyond traditional financial metrics to encompass a wide range of factors that influence long-term performance and social impact.

As global challenges such as climate change, social inequality and corporate governance scandals come to the fore, the integration of ESG criteria has become critical for companies seeking to maintain their social license to operate and achieve sustainable growth.

ESG criteria are structured around three main areas. Environmental Standards Assess a company’s management of natural resources, including energy use, waste management, pollution control, resource conservation and animal welfare. This involves assessing risks associated with climate change, carbon emissions, biodiversity and water management.

operating system Social Standards They focus on how companies manage their relationships with their employees, suppliers, customers and communities. Key areas include working conditions, health and safety, diversity, community involvement, product safety and human rights. Finally, Governance Standards They address corporate leadership, executive compensation, auditing, internal controls and shareholder rights, ensuring transparency and ethical management.

Europe has taken a leading role in integrating ESG principles into corporate governance and investment practices. Notable milestones include EU Action Plan on Sustainable Finance (2018), aims to guide capital towards sustainable investment and improve transparency; EU Classification Regulation (2020), which provides a classification system for environmentally sustainable activities to assist investors and policymakers in identifying and supporting green initiatives; European Green Deal (2019), outlining a comprehensive strategy to achieve climate neutrality by 2050, including actions to reduce emissions and protect the environment; Non-Financial Reporting Directive (NFRD, 2014) and its successors, Corporate Sustainability Reporting Directive (CSRD), requiring companies to disclose their social and environmental impacts, while Sustainable Financial Disclosure Regulation (SFDR, 2021) requires financial entities to disclose information related to sustainable development to ensure transparency for investors.

In Portugal, commitment to ESG is reflected through national policies and strategic initiatives. The country has set an ambitious goal of achieving carbon neutrality by 2050, as detailed in the National Energy and Climate Plan (NECP).

The PT2030 framework reflects Portugal’s focus on ESG and provides financing opportunities to promote sustainable business practices and innovation. The notification of “SICE – Qualification of Small and Medium Enterprises” is particularly significant, supporting SMEs to adopt ESG principles through organizational innovation, digital transformation and investment in eco-innovation.

In addition, recently Corporate Sustainability Due Diligence Directive The Corporate Sustainability Due Diligence Directive (CS3D) will take effect on July 5, 2024, further strengthening ESG principles by promoting sustainable business practices and addressing adverse impacts on human rights and the environment. The directive outlines a due diligence process that emphasizes risk assessment, harm prevention, and transparency in global operations and supply chains.

Therefore, for companies that want to thrive in the current business environment, integrating ESG standards is not just an option, but a necessity. The PT2030 framework provides a clear path to compliance and innovation, while directives such as CS3D emphasize the importance of due diligence and responsibility.

We are committed to helping companies meet these requirements, ensuring they meet regulatory standards and make a positive contribution to society and the environment. Adopting ESG is a strategic imperative that will unlock new opportunities, enhance corporate reputation and ensure long-term success.