ESRS G1 – Business conduct
The European Sustainability Reporting Standard G1 “Business Conduct” is the only topic specific standard relating to governance. This article is based on the final delegated regulation on the ESRS (European Sustainability Reporting Standards), which was published in the Official Journal of the EU on 22 December 2023. Here you can find a general overview of the ESRS.
Standard G1 is used to understand the company’s strategy and approach, its processes and procedures and its performance in relation to corporate policy. Topics covered include the corporate culture, the management of relationships with suppliers, the prevention of corruption and bribery, the company’s commitment to exercising its political influence, including lobbying and payment practices.
What does corporate culture mean?
ESRS G1 Disclosure requirements
Undertakings must apply the disclosure requirements of this standard if material impacts on, or material risks and opportunities related to business conduct have been identified through the materiality assessment. The table below provides an overview of the disclosure requirements of this standard:
The table below provides an overview of the disclosure requirements of this standard:
|
No. |
Disclosure requirement |
Description |
|
1) |
ESRS 2 GOV-1 |
The role of the administrative, supervisory and management bodies |
|
2) |
ESRS 2 IRO-1 |
Description of the processes to identify and assess material impacts, risks and opportunities |
|
3) |
G1-1 |
Corporate culture and business conduct policies and corporate culture |
|
4) |
G1-2 |
Management of relationships with suppliers |
|
5) |
G1-3 |
Prevention and detection of corruption and bribery |
|
6) |
G1-4 |
Confirmed incidents of corruption or bribery |
|
7) |
G1-5 |
Political influence and lobbying activities |
|
8) |
G1-6 |
Payment practices |
1. Disclosure requirement related to ESRS 2 GOV-1 – The role of the administrative, supervisory and management bodies
In this disclosure requirement the company must disclose the role and expertise of the administrative, management and supervisory bodies in relation to the business conduct.
2. Disclosure requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material impacts, risks and opportunities
The company must disclose all relevant criteria used for the assessment, including location, activities, sector and structure of transactions.
3. Disclosure requirement G1-1 – Corporate culture and business conduct policies and corporate culture
According to G1-1, the strategies for creating, developing and promoting a business conduct and the strategies relating to aspects of corporate policy must be disclosed. The policy must include a description of the mechanisms for identifying, reporting and investigating concerns about unlawful behaviour or behaviour that violates the code of conduct or similar internal rules. It must also state whether the company is committed to promptly, independently and objectively investigating incidents related to company policy (including corruption and bribery).
4. Disclosure requirement G1-2 – Management of relationships with suppliers
As part of this disclosure requirement, companies should provide information on the management of relationships with suppliers and the impact on the supply chain. For example, the company’s strategy for preventing late payment, particularly to SMEs, must be disclosed. In addition, it must be stated whether the company takes social and environmental criteria into account when selecting suppliers.
5. Disclosure requirement G1-3 – Prevention and detection of corruption and bribery
The disclosure requirement G1-3 requires a description of the system for preventing and investigating corruption and bribery, for investigating and responding to allegations or incidents of corruption and bribery, and for providing appropriate training. The aim of the disclosure requirement is to create transparency in this context.
6. Disclosure requirement G1-4 – Confirmed cases of corruption or bribery
The company shall provide information on cases of corruption or bribery during the reporting period. The company shall disclose the following:
- the number of convictions and the number of fines for violations of corruption and bribery regulations, and
- all measures taken to address violations of anti-corruption and anti-bribery procedures and standards.
7. Disclosure requirement G1-5 – Political influence and lobbying activities
The disclosure obligation G1-5 requires information on the activities and obligations in the company’s political influence, including lobbying activities in relation to material impacts, risks and opportunities. This includes, among other things, disclosure of the most important topics that are the subject of lobbying activities.
8. Disclosure requirement G1-6 – Payment practices
As part of this disclosure requirement, information must be provided on payment practices, especially with regard to late payments by small and medium-sized enterprises (SMEs). This includes, for example:
- the average time required by the company to settle an invoice after the statutory payment deadline
- a description of the standard payment terms
- Number of court proceedings currently pending due to late payment
