The European CSRD and CSDDD directives are firmly in the minds of everyone (whether positively or not). But as important and a step in the right direction as they are: ESG and sustainability go beyond the implementation and compliance of CSRD and CSDDD alone!
“Regulations are a driving force for the adoption of ESG social behaviors”, says Alejandro Chiappe, Advisory Services Lead Partner and Sustainability & ESG spokesperson at Grant Thornton Argentina. “They help standardize and implement concepts through transparency in the company’s communication with society. The social actors highly value the ESG intangible.”
Your company's sustainable business practices require you to think differently about the consequences of your operations. In addition to ethical reasons to focus on sustainability, there are also (multiple) strategic reasons as the basis for wanting to shift to a more sustainable and responsible way of doing business.
For example, it can improve your company's reputation (and we see a strong preference for sustainable companies and products, especially among younger consumers), it is possible to reduce operational costs, for example by using energy more efficiently, and financial institutions and investors are increasingly looking at the sustainability performance of companies in their investment decisions.
"Companies that are not reached by the CSRD and CSDDD, can find other reasons to take the first steps in the ESG world. These include the integration of smaller companies into the production and value chains of companies under the scope of regulations or corporate policies. As it happened with the development of suppliers, the largest corporations or companies under the information regime will provide the smaller ones with alternatives for financing, training and a greater volume of business that will allow them to undertake these projects," says Chiappe.
Within corporate law, we see that ESG is playing an increasingly important role in the governance of companies. Sustainability is increasingly being officially anchored in the company. Think, for example, of including sustainable provisions in articles of association, including sustainable agreements between shareholders in shareholder agreements, and the compliance-related matters associated with them.
But also: the trickle-down of obligations and risks arising from CSRD and CSDDD legislation to smaller companies. If you do business with large companies that fall directly under the scope of this legislation, you have certainly already noticed this in negotiations and any contract changes that large companies (try to) implement.
And, there are plenty of (international) examples of activist shareholders who make it clear that sustainable business practices, in their view, cannot go fast and far enough.
Companies need to take into account that the way of working and implementing sustainable principles are under scrutiny. With all the (corporate law) consequences that entails.
Sustainable HR focuses on creating a work environment that promotes the health, well-being, and development of employees. Think of flexible and/or hybrid working, diversity and inclusion, and offering training and education focused on sustainability.
“The evidence shows that sustainable practices not only have a positive influence in the workplace, but also generate better results in organizational performance,” says Matiana Behrends, Advisory Services Partner at Grant Thornton Argentina. “Flexible work has shown to have a positive impact on the development of female leaders, just as age diversity contributes to better results in management teams, among other examples.”
Also, consider that especially the younger generations place sustainability high on their wish list when it comes to employers to work for. In the current labor market, it is a priority for a company to focus on sustainability and to keep a close eye on developments. Within our employment law practice, we have seen this turning point for some time, and legally this is therefore a point of attention.
“This is also a critical aspect when it comes to retaining talent. If younger generations perceive that their employer's actions are truly committed to ESG values, they will feel like an active part of a noble and appreciated cause, identifying very strongly with the company and its values,” adds Chiappe.
Conscious contracting, also known as sustainable contracting, is about incorporating sustainability principles into negotiations and agreements. When executing sustainably drafted contracts, various considerations are taken into account. This includes not only looking at economic benefits but also considering the impact of the agreements made on people and the society. Contracts are characterized, among other things, by the use of simpler language (and are therefore also easily readable for people who have not completed a full law degree).
“These types of measures are inclusive, as they allow employees with different educational backgrounds to understand their employment relationship with greater certainty and clarity. Transparency and fair treatment are characteristics that professionals value when choosing a company in which to develop their careers,” comments Behrends.
Employment contracts are particularly suitable for this form of contracting, but in our opinion also other contracts and relationships benefit well from this way of contracting. Later this year (2024), we will publish a white paper on this subject. Here we will delve deeper into the benefits of conscious contracting.
In addition to legal considerations, there are also various tax reasons for your company to focus on sustainable operations.
Sustainable tax is about applying tax strategies that not only comply with legislation but also contribute to sustainable development. This can be done, for example, by encouraging investments in green technologies or by supporting social projects through tax benefits.
"Although in Argentina, recent tax reforms that head the current fiscal agenda do not focus on ESG, we must highlight that many of them pursue as their ultimate objective the creation of conditions that promote investments in development projects in industries such as tourism, forestry, infrastructure, mining, technology, energy and oil & gas, favoring the positioning of our country as a new supplier in global markets" highlights Julia Adano, Lead Tax Partner at Grant Thornton Argentina.
“Therefore, in addition to the incorporation of ESG factors as a result of international corporate demands for compliance with certain regulations and standards, the outlook is that this trend will become stronger in Argentina if we consider that more economic actors are aiming for sustainable strategies when deciding their investments. In this context, it is expected that the Treasury will incorporate new and more regulations that contemplate the granting of tax benefits to those who align their growth strategies with these factors."
The above examples of being legally sustainable are certainly not complete. Sustainability and ESG also play an increasingly important role in consumer law and international trade law. The importance for your company to act proactively and develop strategies that promote sustainability is paramount. Thus, your company and your willingness to implement sustainability play a significant role in the shift we as a society are making in the field of sustainability.
“At Grant Thornton Argentina, we have a multidisciplinary team, experience in ESG projects and alliances with sector institutions. This allows us to provide a comprehensive insight to our clients, accompanying them in their processes of adaptation to new market practices and providing them with innovative perspectives that drive their sustainable development”, highlights Alejandro Chiappe.
It is clear that sustainability and ESG encompass more than just compliance with regulations such as CSRD and CSDDD. It is about integrating these principles into all aspects of business operations and recognizing the responsibility that companies have towards society as a whole and the climate in particular.
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"Companies that are not reached by the CSRD and CSDDD, can find other reasons to take the first steps in the ESG world. These include the integration of smaller companies into the production and value chains of companies under the scope of regulations or corporate policies. As it happened with the development of suppliers, the largest corporations or companies under the information regime will provide the smaller ones with alternatives for financing, training and a greater volume of business that will allow them to undertake these projects," says 
“The evidence shows that sustainable practices not only have a positive influence in the workplace, but also generate better results in organizational performance,” says 
"Although in Argentina, recent tax reforms that head the current fiscal agenda do not focus on ESG, we must highlight that many of them pursue as their ultimate objective the creation of conditions that promote investments in development projects in industries such as tourism, forestry, infrastructure, mining, technology, energy and oil & gas, favoring the positioning of our country as a new supplier in global markets" highlights 