In today's world, businesses realize the importance of incorporating Environmental, Social, and Governance (ESG) factors into their operations for long-term sustainability. This is important not only for running the business but also for investors who consider these factors in their investment decisions. Stock exchanges play a key role in promoting sustainability for both corporations and investors.
ESG practices are still in the early stages of development in Macedonia, the Macedonian government has taken steps to promote sustainability and encourage responsible business practices in the country. In 2020, the government adopted the National Strategy for Sustainable Development, which aims to promote social, economic, and environmental sustainability in the country.
The strategy includes targets for reducing greenhouse gas emissions, increasing the share of renewable energy in the energy mix, and improving energy efficiency. It also includes targets for improving social equity, reducing poverty, and promoting education and health. The government has also launched several initiatives to promote sustainable practices in the private sector.
For example, in 2019, the Ministry of Economy launched the Green Finance Initiative, which aims to promote green financing and investments in the country. The initiative includes training and capacity-building for financial institutions on how to evaluate and finance sustainable projects. The government has also launched a program to provide financial incentives for companies that invest in energy efficiency and renewable energy projects.
In November 2021, the Macedonian Stock Exchange adopted the Corporate Governance Code. The Corporate Governance Code incorporates ESG aspects to promote transparency. It requires publicly traded companies to report on environmental and social issues in their annual reports, including gender representation in the supervisory and management board, communication with stakeholders, and environmental and social policies. Companies must also disclose all significant information related to their financial condition, operations, ownership structure, and corporate governance in a timely and accurate manner. These companies should also establish internal policies and procedures that promote responsible behavior towards the environment, society, and all stakeholders and build a business model that takes into account the impact of their activities on the environment and broader social community. These policies should be publicly available on the company's website, along with other relevant information provided with the Code. The company's Board is responsible for ensuring the timely and accurate publication of all information through the electronic information system for listed companies on the Macedonian Stock Exchange (SEI-NET) in accordance with the law or the Listing Rules.
This information must include details on shareholder rights, the internal acts that determine the responsibilities of the supervisory and management board, the Board Profile of the Supervisory Board, the ethical Code of the company, and environmental policies and issues of social interest, in line with the ESG factors.
To ensure that they are transparent and compliant with legal requirements, companies have various options for reporting their ESG information. These reporting options include integrating ESG disclosures within the company's annual report, adopting a separate sustainability report that includes all relevant sustainability information, or using integrated reporting to combine financial and sustainability reporting in a single document that demonstrates how the company's strategy and value creation model are linked to its ESG performance. When disclosing ESG information, companies can also utilize internationally accepted reporting standards and frameworks. In North Macedonia, the most commonly used reporting standards and frameworks are the GRI Standards developed by the Global Reporting Initiative (GRI), the IIRC Framework developed by the International Integrated Reporting Council (IIRC), and the SASB Standards developed by the Sustainability Accounting Standards Board (SASB). These frameworks provide a structured and systematic approach to ESG reporting, ensuring that companies report their ESG information in a standardized and comparable manner.
The inclusion of ESG factors in the Corporate Governance Code highlights the importance of responsible corporate governance practices and promotes transparency and accountability among publicly traded companies in Macedonia. However, it is worth noting that not all companies operating in North Macedonia have fully integrated ESG considerations into their corporate culture.
While some companies have embraced sustainability and social responsibility as core values, others have been slower to adapt to these trends. As such, the degree to which ESG factors are integrated into the corporate culture of Macedonian companies can vary widely. Overall, there is growing awareness of the importance of ESG factors in the business community in North Macedonia, and this is reflected in the country's regulatory framework. However, more work may be needed to fully integrate ESG considerations into the corporate culture of all companies operating in the country.
By Gjorgji Georgievski, Partner and Ema Tasevska, Associate, ODI Law