What should be considered if the company has not yet implemented the ESG concept
Ukraine is actively developing an environment of companies that already operate in international markets, declare compliance with sustainable development goals or achieve certain indicative goals within a specific timeframe (e.g. decarbonisation of activities) by introducing ESG tools or at least introducing ESG in their activities and demonstrate the results of their activities in this area.[1]
Factors influencing the relevance of ESG in Ukraine
ESG initiatives are implemented against several important external (to the company) processes. First, it is the intensification of the implementation of the Paris Agreement in Ukraine and the approval of new iterations of Ukraine’s Nationally Determined Contribution to the Paris Agreement, significantly reducing greenhouse gas emissions. Secondly, the implementation of the Association Agreement with the EU and Ukraine’s obtaining the status of a candidate for EU membership. Thirdly, Ukraine’s declaration of a “Green (energy) transition” in the context of the EU Green Deal to achieve climate neutrality by the middle of the century. An additional factor was russia’s full-scale military aggression against Ukraine since February 2022. All these factors are forcing companies to review their business strategies.
Due to the country’s martial law, certain areas of responsible business conduct are being implemented more effectively. For example, companies are involved in ensuring the welfare of communities affected by military aggression or on the territory of which such companies operate by implementing programmes for the employment of veterans, helping employees who joined the Ukrainian Defence Forces and their families, organising blood donations for the needs of the Armed Forces, providing psychological support, helping to rebuild destroyed buildings, and so on.
Internal factors, such as the ability to attract investment and participate in EU supply chains, are analysed here.
Why an ESG concept should be implemented in your company
Given the global importance of sustainable development, achieving its goals depends on each company’s actions. Therefore, a responsible attitude towards environmental impact and demonstration of involvement in implementing ESG strategies are crucial for the company, its operations and financial results.
However, many companies implement measures within the framework of the ESG concept sporadically without introducing them at the official level (i.e., without identifying and fixing these processes in internal documents), which does not have a full-fledged positive effect on the company’s activities.
Systematising the company’s activities and processes in ESG areas, identifying ESG factors, criteria, and risks, implementing an ESG strategy to avoid and minimise ESG risks, and choosing ESG reporting tools will help streamline ESG activities and realise their benefits.
In addition, by launching appropriate processes in their operations, companies that compile a list of factors that significantly impact their activities can identify key risks that impact their long-term development or will have such an impact in the future.
Thus, ESG factors help to identify:
- in the environmental sphere: the level of negative impact of the company’s activities on the environment (air, soil, water) and choosing ways to reduce such impact through the implementation of certain goals, trajectories of their implementation and tools (means) of achievement;
- in the social sphere – the impact on its employees (ensuring the rights of employees, non-discrimination in the workplace, inclusiveness, etc.), as well as the impact of its activities on society (local, regional, national, and global level);
- in corporate governance – compliance with anti-corruption requirements, transparency in management and operations, reporting, etc.
It is also critical to consider the component related to the company’s counterparties and invested assets in the company’s ESG strategy, as it is equally important to follow the vector of sustainable development on the part of the company itself and to choose partners with similar values.
Is the ESG concept relevant for all companies?
The introduction of ESG criteria into a company’s business and development strategy is relevant for companies that
- demonstrate a responsible approach to the impact that the company’s operations and its counterparties have on the environment and social sphere, as well as the reverse impact of these factors on the company’s operations;
- assess and take into account long-term prospects in the company’s activities;
- consciously build the company’s strategy and management;
- plan to operate in EU markets or attract investment;
- participate in the supply chain of companies that comply with ESG obligations voluntarily or due to regulatory requirements;
- take into account the economic effect of implementing ESG tools.
Given the need to attract investment and foreign loans for reconstruction, Ukrainian enterprises’ implementation of the ESG concept in their operations is highly relevant. It helps demonstrate the company’s long-term sustainability strategy.
The energy sector accounts for over three-quarters of global greenhouse gas emissions and is included in the List of activities requiring an integrated environmental permit[2]. Therefore, it is extremely vulnerable to ESG risks, especially those related to applying radical regulatory measures to companies whose activities significantly negatively impact the environment. Therefore, energy companies need to pay special attention to developing sustainable development strategies and ESG activities.
At the same time, energy companies whose activities are based on the use of clean technologies can obtain additional resources, tools, and bonuses to develop their activities (increased funding opportunities, attraction of conscious, loyal employees, etc.).
Therefore, for companies considering the vector of development of the EU legislation and regulatory policy on implementing sustainable development goals, the expediency of taking ESG risks into account in their strategy is growing. On the one hand, this approach reveals the company’s values. On the other hand, it directly affects the prospects of companies entering the international market or planning to attract external financing. However, among the wide range of options for choosing strategic development directions and tools for implementing the ESG concept, it is important to identify and select those that will contribute to the long-term sustainability of the company and its operations.
The key concepts of the ESG concept are analysed here, and the correlation between the concepts of “sustainable development” and ESG, as well as the arguments in favour of implementing and developing ESG, are set out here.
In the following publications, we will provide a legal justification for the feasibility of ESG – an overview of legal and regulatory requirements in this area.
If you would like to discuss the issues raised in this paper in more detail, please contact the SK team.
Information contained in this legal alert is for general informational purposes only, does not constitute legal or other professional advice and should not be relied upon as a substitute for specific professional advice adapted to the specific circumstances.
[1] https://dtek.com/investors-and-partners/esg/
https://www.naftogaz.com/sustainability https://www.ukrnafta.com/ukrnafta-za-pidtrymky-usaid-provadzhuye-esg-praktiki
[2] The Law of Ukraine “On Integrated Prevention and Control of Industrial Pollution” comes into force on 08.08.2025.
