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Manila Bulletin devider Opinion devider Employers and the shift to EU sustainability regulations

Employers and the shift to EU sustainability regulations

Published Dec 3, 2024 09:46 pm

To remain competitive in the global market, Philippine companies must adapt to the European Union's (EU) increasingly stringent environmental, social, and governance (ESG) requirements. This shift toward formalized ESG practices is driven by legislation and a growing global focus on sustainability, emphasizing responsible business conduct.

A recent study by Danish Industry (DI) and the Employers Confederation of the Philippines (ECOP) assessed Philippine companies' awareness of these new EU sustainability standards. It highlighted the profound impact of these regulations, revealing both challenges and opportunities for Philippine companies trading with Europe.

The European Green Deal, a set of policies and commitments, aims to create a climate-neutral EU by 2050. It mandates a transition to a low-carbon, resource-efficient economy, impacting international trade partners like the Philippines. The Sustainable Finance Strategy and Just Transition Mechanism support this framework, ensuring a fair transition for all.

Compliance with these new requirements is crucial for the Philippines to strengthen its relationship with the EU and pursue new opportunities. Embracing sustainability can also improve operational efficiency and responsibility.

However, challenges persist. Many small and medium enterprises (SMEs) struggle to meet these demands due to a lack of knowledge, skills gaps, limited resources, and financial constraints. The study found that 75 percent of SMEs and 67 percent of large corporations are unfamiliar with upcoming EU regulatory demands.

Awareness of specific directives is also low. Only three percent of SMEs and seven percent of large corporations are familiar with the Corporate Sustainability Due Diligence Directive (CSDDD), which requires businesses to assess their supply chain's environmental and social impacts. Similarly, only 19 percent of SMEs are aware of the Corporate Sustainability Reporting Directive (CSRD), which mandates ESG impact disclosure.

Despite these challenges, Philippine firms recognize the potential benefits of aligning with ESG standards. Trade associations and business networks are crucial in supporting SME sustainability initiatives. With 65 percent of SMEs acknowledging the significant impact of sustainability on their operations, they must adapt to remain competitive.

Offering basic ESG training, including workshops and webinars, can help SMEs understand these concepts. The study reported that 94 percent of respondents expect sustainability to be a priority within the next three years.

This sustainability transformation allows Philippine businesses to enhance their global standing by demonstrating responsible practices. While demanding investment, this transition, supported by organizations like ECOP, is essential for compliance and a sustainable future. ECOP is committed to empowering businesses through free ESG learning sessions, equipping them with the tools and strategies necessary to meet global sustainability standards.

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