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From regulation, reporting, and finance to strategic change.
How does ESG affect business in your sector?
Risk and opportunities associated with ESG (Environmental, Social, Corporate Governance) have a tangible and measurable impact on businesses. This cannot escape the attention of investors, private equity funds, and financial institutions, with global economies and corporations undergoing transformations under pressure from regulators, markets, and capital owners.
Basic information about ESG
In order to provide a stimulus for real economic change, the European Union (EU) is focusing its actions on the financial sector, starting from redirecting funding towards sustainable business activity. For this reason, financial institutions will have to incorporate non-financial opportunities and risks into their investment and financing process. This necessitates a certain balancing of investment portfolios. Consequently, investors need relevant competencies and tools to assess companies from the perspective of ESG as well as access to comparable and reliable non-financial information, disclosed by companies in a consistent and comprehensive manner.
There are at least three reasons why companies integrate sustainability criteria into their strategies:
Market pressure and trends, including ownership requirements
Challenges facing businesses
Drafting and implementing growth as well as performance improvement strategies; business partnering.
Reducing costs, improving quality and effectiveness. Freeing up time to spend on broader
analyses/activities that generate more value.
Sustainability can act as a catalyst for long-term growth, and ESG challenges can turn into tangible and
significant benefits.
We support our clients in the following areas:
- How should ESG goals be integrated into business strategies?
- What sector benchmarks/trends should be identified in terms of ESG?
- How to develop the solutions that foster long-term value creation in keeping with sustainable development?
- How can resources be used effectively to boost the value of the company in the eyes of customers and investors?
- How can the majority owner’s ESG requirements be met?
- How can a “net-zero” strategy be achieved?
- How to obtain an EQUAL PAY Certificate?
Our experience:
Case study 1 Case study 2 Case study 3
Challenge faced by our client:
A leading chemical industry company whose mission is to promote sustainable development asked us to create a model to estimate its actual environmental and social impacts. In light of its scale and diversity, the company was looking for a sufficiently flexible framework to measure and evaluate its social impacts at the level of both the whole corporation and products.
Our solution:
Throughout the project, we worked closely with the client’s team responsible for sustainability strategy. We adapted our Total Impact Measurement and Management (TIMM) model by using a repeatable approach to monitoring the corporate footprint in its economic, social, and environmental aspects. We analyzed the client’s operations, supply chain, and impact on customers. We examined the company’s impact on GDP, health and safety incidents, human capital development, and contribution to climate change and local air pollution. We also supported the client at the level of investment decisions and the planning of future locations.
Challenge faced by our client:
A global coffee manufacturer needed to analyze the extent to which its strategy was linked to the Sustainable Development Goals (SDGs) and how this strategy could be implemented based on a better understanding of significant problems facing our client’s key stakeholders.
Our solution:
In the first stage of the project, we focused on identifying and mapping the company’s key stakeholders. After that, we analyzed the significance of the sustainability challenges faced by our client. The next step was to create a matrix of connections illustrating how the client’s strategy could affect stakeholders in terms of sustainability criteria. This approach helped us to clearly identify the measures that the client should take and to develop indicators to evaluate the effectiveness of such measures.
Challenge faced by our client:
One of the banks operating in the EU sought our advice and assistance in developing a path
to implement ESG regulations.
In addition to the need to meet legal requirements and work towards sustainable finance, the
client also wanted to improve its competitive advantage.
Our solution:
We analyzed the impact and scope of the necessary EU legislation, and we helped the client to understand how sustainable finance requirements translated into the conditions of doing business as well as to adjust its product and customer portfolios to the EU taxonomy. In the next step, we worked with the bank’s risk management team to create a data map that enabled us to identify key data, collect them properly, and ensure their quality at relevant level. By performing an analysis of the bank’s stakeholders, we also defined the next steps to be taken to achieve full compliance with the EU reporting requirements.
Regulatory compliance
Compliance – non-financial reporting
Challenges faced by businesses
Shareholders and investors are placing growing emphasis on the importance of long-term, sustainable business models, which are measured by ESG reports that address environmental, social, and corporate governance issues. If companies do not publish high quality non-financial reports, they may soon face valuation problems as well as difficulties finding sources of financing and reaching out to investors and customers.
From the financial sector and capital markets all the way to all businesses regardless of the sector, non-financial reporting will be subject to strictly defined regulations and standards. Every company will be required to define and report on key risks and performance indicators in the area of ESG.
We support our clients in the following areas:
- How should technology be used to streamline the process of non-financial reporting?
- How should KPIs related to the organization’s environmental and social impacts be defined and used?
- Non-financial becoming financial. Jak zmapować korzyści, szanse i ryzyka dotyczące ESG?
- How to set up a comprehensive process of collecting and analyzing ESG data?
- How to respond on an ongoing basis to the needs of various stakeholders?
- How to meet the majority owner’s requirements in the area of ESG?
- How to measure, reduce, and report on an organization’s carbon footprint?
Regulatory compliance
Compliance – tax and legal provisions
Challenges faced by businesses
Nine out of ten Polish CEOs surveyed in the CEO Survey 2021 see tax uncertainty as posing the greatest risk and challenge. New national and EU laws are the first aspect of ESG being realistically noticed by our clients. Businesses have heard about the Green (R)evolution and want above all to rest assured that they meet, and will continue to meet, broadly-understood environmental compliance requirements. At PwC, we can provide them with this comfort by keeping up to date with upcoming legislative changes and their potential impact on the business of our clients.
We support our clients in the following areas:
- How to effectively implement national and international ESG regulations in day-to-day tasks?
- How to ensure compliance with the EU provisions on the SCIP database (a database of products containing hazardous substances) and PCN (a database of hazardous substances)?
- How will electronic invoicing affect my business?
- What legal support in terms of ESG can I receive in such areas as real estate and FS (e.g. contracts)?
- Is it possible to lower the liabilities resulting from the newly-introduced environmental and food taxes (the sugary drink tax, the fee on alcoholic beverages sold in containers of up to 300 mL, the capacity fee, refundable deposits paid on such products as lead-acid batteries)?
Find out more about environmental regulations
Nasze doświadczenie:
Case study 1 Case study 2 Case study 3
Challenge faced by our client:
A European stock exchange sought our assistance in compiling a non-financial report in line with the GRI Standards and developing an ESG strategy.
Our solution:
One of the elements of our work involved conducting dialogue with key stakeholders on non-financial disclosures and sustainability reporting. In addition, we defined major areas of non-financial risks and performed an international benchmarking analysis of the best reporting practices in the client’s industry. As such, we worked out a new strategy of non-financial reporting as well as determined the scope of data to be presented in ESG reports and streamlined the process of obtaining such data. The client also received a sustainability report compiled in line with the GRI Standards, taking into account the requirements and recommendations included in the following standards and guidelines: WFE ESG guidelines and indicators (2018); SASB Security & Commodity Exchange, Sustainability Accounting Standard; CDP Climate Change (2019).
Challenge faced by our client:
A private equity fund needed support in defining goals and metrics as well as monitoring the operationalization of ESG strategies in its portfolio companies.
Our solution:
We developed a methodology for calculating over 200 ESG indicators, including identifying data sources, determining the correct calculation of indicators, and then drafting guidelines for Power BI dashboards. In addition, we provided the client with calculations of the organization’s carbon footprint.
Challenge faced by our client:
One of Poland’s largest banks asked us to work out a strategy for developing non-financial data analytics.
Our solution:
As part of this project, we developed a strategy for the ongoing monitoring of key risk indicators (KRIs) and key performance indicators (KPIs) for 170 processes identified in the bank. The bank’s board and senior managers received data summarizing the analyses being performed in the form of a dedicated dashboard. The project also involved implementing the analytics of data covering the development of over 130 KRIs and KPIs in the processes selected for the pilot phase (identifying data sources, defining the rules of calculating indicators), including designing a dashboard application using a Business Intelligence (BI) tool to present the aggregated results of the indicators that had been developed.
Nasze rozwiązania:
Case study 1 Case study 2 Case study 3
Challenge faced by the client:
One of the largest car manufacturers wanted to reduce carbon emissions to zero and potentially “erase” its past carbon footprint within a time frame of several years. The client no longer wanted to use electricity produced from coal combustion, and chose to invest in generating its own electricity based exclusively on renewable sources (such as photovoltaic technology, wind energy, and so on).
Our solution:
We are supporting our client in both selecting the best source of energy as well as ensuring compliance with electricity generation regulations (obtaining a license, calculating excise tax, record keeping, and so on). We are working with the client’s team of experts on tax and legal issues as well the technical aspects of factory maintenance. Owing to our broad knowledge and experience in this field, we have been able to help the client both on strictly technical, electricity-related issues and by providing tax and legal consultancy services.
Challenge faced by the client:
One of our clients runs a shared services center that brings together specialists in reporting on ecotaxes in all EU countries. However, in order to make sure that the team covers all the reporting in this area, the client asked us to compile a report presenting the main aspects of each ecotax in individual EU member states.
Our solution:
For reasons related to our experience and collaboration with other PwC firms, we were able to analyze ecotaxes in all the EU countries. We therefore have unique knowledge about environmental taxes in various member states.
Challenge faced by the client:
One of our clients is a lubricant distributor in the EU. The introduction of the EU’s SCIP and PCN databases necessitated ongoing reporting on the hazardous substances that our client places on the EU market. Failure to comply with these requirements could lead to high financial penalties (for example, up to EUR 5 million in Portugal, up to EUR 50,000 in Poland, and so on).
Our solution:
We have provided our client with an analysis of substances, indicating those that are regarded as hazardous. In addition, we submit the necessary notifications on behalf of our client, thus ensuring that the client complies with relevant requirements and risks no financial penalties. Since these are EU-wide regulations, as opposed to national ones, this means compliance at the European level.
Capital raising and financing possibilities
Challenges faced by businesses
The future of finance is green. This has been confirmed by regulatory changes and initiatives taken at the EU level:
- the European Green Deal – an action plan adopted by the European Commission: a sustainability strategy for the EU
- “Net Zero” – making Europe climate-neutral by 2050 – limiting global warming
- the EU budget for 2021–2027 with nearly 30% of funding being allocated to initiatives and investments in the area of green transition and digitization
- the National Recovery Plan – much of the funding will be allotted to “green energy and the reduction of energy consumption” and “green, smart mobility”
- the plans of support for climate action on the part of the financial services sector. As announced in the plan on financing sustainable growth, the EU decided to start from the financial sector to motivate the market to implement changes. The EU’s Sustainable Finance Disclosure Regulation, which began to apply on 10 March, requires financial investors to report on the level of sustainability in their investment portfolios. Financial institutions will have to integrate non-financial risks and opportunities into their investment and financing process. For this reason, they need tools to assess ESG companies and access to comparable and reliable non-financial information, disclosed by companies in a consistent manner.
Companies that will not address ESG issues in their operations, as reflected in their non-financial reports, may soon find it difficult or impossible to raise funding to finance their growth. The businesses that will choose to follow the path of sustainability will enjoy better access to capital and greater financing possibilities.
We support our clients in the following areas:
- How to prepare to raise capital?
- How to adjust a long-term investment plan to the possibility of obtaining outside support in the form of subsidies, reliefs, and other incentives?
- How to obtain public funding (including EU funding)?
- How to diversify the sources of financing by raising funding through the issue of ESG bonds?
- ESG Due Diligence – how to invest in businesses that meet ESG requirements?
Nasze doświadczenie:
Case study 1 Case study 2 Case study 3
Challenge faced by the client:
A client in the retail sector decided to build a new automated warehouse to streamline the supply chain and use low-energy control technology to eliminate errors and reduce emissions associated with transport inefficiencies. The client sought our assistance in obtaining funding to finance the investment.
Our solution:
We provided the client with comprehensive support in entering the Polish Investment Zone, including:
Challenge faced by the client:
Implementing a zero waste project for a client in the bakery sector looking to reuse production waste.
Our solution:
We analyzed the possibility of obtaining public funding for the construction of a waste processing facility that would allow the client to obtain raw materials for a separate production process. The analysis also covered a review of available subsidy programs and tax incentives for research and development in the area of a new processing technology.
Challenge faced by the client:
A client from the automotive sector wanted to reduce the consumption of energy in its manufacturing process and in this way also reduce the cost of electricity, which was a major component of the production costs.
Our solution:
We provided our client with technological support, preceded by a review of available technologies allowing the construction of generating capacity, support in the area of grants related to the identification of energy inefficiencies, the formulation of strategies for their optimization, and support in obtaining subsidies.
Basic information about ESG
Environmental, social, and corporate governance (ESG) issues appeared in 2005, but the subject has continued to attract special attention since the publication of the UN Sustainable Development Goals in 2015. All these issues taken together constitute the sustainability criterion for businesses.
The abbreviation ESG represents a range of issues, and not all of them will be equally relevant in every sector. For example, a company that provides financial services might focus more on human capital and data security, whereas a food manufacturer could be more interested in how raw materials are obtained.
Who should apply the ESG principles?
- Financial services sector
- Private equity portfolio companies
- Companies planning to launch an IPO/issue bonds
- Global investors (after 2025 also smaller entities)
- Listed companies
- Companies seeking financing from banks
- Companies that care about the environment and the local community
- Business Transformation Leaders
- Companies looking to attract talents
A company’s path to sustainability includes several important steps. Each company must take into account the conditions in which it operates: the sector, the legal regulations, the structure of ownership, and the level of maturity in the area of climate, social responsibility, and corporate governance, combined with the expectations and requirements of stakeholders and investors as well as its own business goals.
E - Environment
CO2 emissions Product carbon footprint Financing environmental impacts Vulnerability to climate change Water management Biodiversity & land management Raw material supply Toxic and waste emissions Packaging & waste Electronic waste Clean technology Green building Renewable energy
S - Social responsibility
Human resources management Occupational health & safety Human capital development Supply chain standards Product quality & safety Chemical safety The financial security of products Privacy & data protection Responsible investment Health & demographic risks Verified sources on the part of suppliers Access to communication services Access to finance Access to healthcare Health and nutrition opportunities
G - Corporate governance
Management & supervision Supply chain oversight policies Reporting & communication with stakeholders Diversity in management board composition Executive compensation Business ethics Avoidance of monopolistic practices Prevention of corruption incidents Stable financing system Tax transparency
Find out more about how ESG affects your business
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