Introduction

It is safe to say that the level of integration between European nations being members of the European Union (EU) is at its highest point. The response of political elites to the war in Ukraine proves that thesis. However, EU nations have been not only getting closer and closer to each other politically but also economically.

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It is not uncommon to see Polish companies use French capital to invest in Germany. This level of integration brings tremendous responsibility to multinational companies that want to continue their business in other EU countries. They need to simultaneously fulfill different Environmental, Social, and Governance (ESG) related regulations implemented by each government in which they conduct business. What are the challenges Polish enterprises are facing when it comes to ESG?

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EU Regulations vs. National Law

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The directive 2014/95/EU of the European Parliament implemented in 2014 regulates how European companies need to disclose their non-financial assets and diversity information. According to that document, since 2018, the most prominent Polish companies have been required to publish ESG reports. Concurrently, Polish corporations had to also cooperate with the Polish national law and issue ESG statements on different terms. The whole process was seen as messy and bureaucratic.

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Finally, in 2021, the European Commission updated its non-financial reporting regulations. No matter what country they are based in, all corporate actors in the EU will follow the same rules and issue the same type of reports. It seems that, at least when it comes to the ESG reporting, the situation for multinational corporations has become much more straightforward, but that is just the tip of the iceberg.

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Let’s say a Polish company wants to cooperate with German contractors on a project. In the past, both companies would agree to work side by side primarily based on financial criteria, hopefully bringing benefits to both actors. Nowadays, ESG values are placed between both collaborators and must be carefully verified before the two parties decide to team up. For example, starting from 2023, German companies must verify their supply chains based on the ESG regulations implemented in Germany.

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It means for Polish enterprises that obeying the Polish rules is simply not enough anymore. Now, they also need to submit to rulings passed in the country where their collaborators are registered, in this case—Germany. If the same company uses financing from a French bank or is supported by a French investment fund, it will also need to accept French rules and adapt to them. Perhaps this type of issue will also be solved in the future by the European Commission, and laws from different countries will be unified. Still, it remains a significant obstacle for now.

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Conclusion

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Polish companies face substantial challenges regarding the ESG regulations implemented in the countries of origin of their counterparts. To further boost partnerships between European multinational corporations, the European Parliament needs to adopt common standards for all EU member states. For now, Polish firms have to depend on consulting companies like Deloitte or KPMG, which have global expertise and help deal with this type of issue.