In international transactions (mergers, acquisitions, investor entry, financing, joint ventures), ESG is no longer just an „add-on to the presentation”. It is increasingly influencing the valuation of companies, closing conditions and the extent of warranties in the contract, as it touches on regulatory, reputational and operational risks in the supply chain. CSRD (EU Directive 2022/2464 on ESG reporting) and ESRS (reporting standards adopted by EU Commission Regulation 2023/2772). make it necessary for companies to report ESG based on specific data and consistent documentation.
Why ESG determines the success of negotiations when selling a business or company
Buyers and financing institutions often demand information from the seller regarding environmental data. This is because they are vitally interested in whether hidden costs (environmental, employee, anti-corruption) or risks associated with subcontractor contracts will be assumed with the purchase of the company or the entire company. For this reason, ESG is part of due diligence and the conclusions of such in-depth analyses are transferred to the contracts related to the acquisition of the company or business.
It is also worth bearing in mind that even when a company is not yet subject to reporting, a partner or co-operator may require data „indirectly” - because it itself reports data according to CSRD/ESRS and therefore collects information from entities with which it is affiliated. In practice, this means that the preparation of ESG data is nowadays sometimes a condition for being admitted to a tender, retaining a contract or obtaining financing.
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ESG in practice: environment, people and corporate governance
ESG covers three areas: Environmental (e.g. emissions, energy, waste, water), Social (working conditions, health and safety, human rights in the value chain) and Governance (oversight, ethics, anti-corruption, supplier control).
In international transactions, we most often notice problems in the area of corporate governance of our clients. If there is a lack of procedures, assignment of responsibility and consistent documentation, even good environmental initiatives can be challenged as unverifiable. That is why putting governance and processes in order within a company is often the quickest way to improve a company's credibility before an investor. After all, as the saying goes: a company is worth as much as its procedures are worth. And there is something in that.
CSRD and ESRS after the stop-the-clock directive
The CSRD introduces mandatory ESG reporting according to ESRS standards, but companies do not have to do this immediately - the obligations are being introduced gradually.
The largest companies, i.e. so-called public interest entities (e.g. listed companies, banks or insurance companies) that have more than 500 employees and meet certain financial criteria - have already started to report ESG-first for 2024 (reports appear in 2025). For other companies, the deadlines have been postponed by two years under the so-called „stop-the-clock” directive 2025/794:
- large companies (meeting at least two of the three criteria: having more than 250 employees, net revenues of more than EUR 50 million or having a balance sheet total of more than EUR 25 million) .will only report for 2027,
- and small and medium-sized listed companies for 2028.
In practice, this means that it is worth building procedures and reporting systems now that can be easily adapted to future changes. Reporting follows the European ESRS standards adopted by the European Commission. Of key importance here are ESRS 1 and ESRS 2 as general standards, with ESRS 2 setting out the basic information that a company must disclose regardless of which ESG areas are most relevant to it. ESRS 1 sets out the so-called general principles for preparing the report - explaining how to identify the relevant ESG areas, what data to collect and how to present them so that the report is consistent and comparable. ESRS 2, on the other hand, is more practical and identifies the specific information a company needs to disclose, including on the business model, governance, ESG policies, risks and targets and indicators. Importantly, some of the disclosures under ESRS 2 are mandatory regardless of which ESG areas are most important to the company.
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Double relevance and data: how to avoid unnecessary reporting
ESRSs are based on the principle of dual materiality: the company simultaneously assesses how its activities affect the environment and people and how ESG factors affect the company's financial performance, risks and opportunities. This is important in all kinds of transactions, because, as we pointed out above, the buyer expects information that is backed up by concrete data to form a coherent set of policies, actions, targets, indicators and, of course, source data.
As a general rule, the ESRS does not impose an obligation to implement specific „remediation” initiatives. It does, however, require a company to fairly disclose whether it has policies and procedures in place, what actions it is taking, what targets it is setting for itself and how it is measuring the progress of its business (including through relevant, measurable indicators). In transactions, this distinction is fundamental because it is not really about some ideal of reporting, but about the consistency of documents and evidence and the defensibility of the data we report.
A major challenge for companies today is the collection of ESG data from the entire value chain, in particular from subcontractors and suppliers. This includes information on emissions, energy consumption or labour standards, with uniform forms, procedures and supporting documents for this data often lacking in practice.
For this reason, it is worth sorting out these issues as early as at the stage of preparing the company for a transaction and clearly defining where the ESG data comes from, who is responsible for preparing it, how it is updated and how it is verified.
This is important because ESG reports will be subject to scrutiny (attestation), which means that the company must be able to demonstrate their reliability and credibility to the auditor.
From documents to clauses - ESG policies, objectives and actions in the transaction process
In practice, preparing for a transaction starts with getting the basics right:
- ESG policy (i.e. who is responsible, what are the procedures, what is the oversight of suppliers and communication with them),
- ESG objectives (i.e. measurable targets and timelines) and a data collection mechanism.
It is then determined which ESG measures are key from an industry and market perspective - and how to transfer them into contracts, which is crucial as it minimises our reporting risks by strictly defining who is responsible for providing information.
The following are examples of activities that most often appear in due diligence, i.e. in-depth analyses of companies carried out prior to a transaction such as the purchase of a company, an investment or the establishment of a partnership, the purpose of which is to check the legal, financial and operational situation of a company and to identify potential risks. Nowadays, such analyses also increasingly include ESG issues, i.e. the company's impact on the environment, society and governance, which is important in international transactions and beyond. These include, in particular, anti-corruption procedures and conflict of interest management, health and safety training and standards, minimum supplier standards and the right to audit in the supply chain, how indicators (e.g. energy, waste, emissions) are calculated and how evidence is archived or how marketing communications are verified to reduce the risk of greenwashing.
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ESG in financing and „green” instruments
If financing is also part of the transaction, it is increasingly important how the company describes the environmental objectives of the project and how well it can document them. This is particularly important when a company wants to raise capital and presents the financial instrument as so-called „green”, i.e. linked to environmentally beneficial activities. In this case, a mere marketing statement is no longer sufficient. Concrete information is needed showing what the funds will be used for, what environmental objectives the project is supposed to achieve and on what basis the company claims that the investment is indeed sustainable.
This is what Regulation (EU) 2023/2631, which introduces the European Green Bond Standard (EuGB), serves to do. A green bond is an instrument through which a company or other entity raises finance for projects to support environmental objectives, such as reducing emissions, improving energy efficiency or developing renewable energy sources. The regulation aims to clean up this market and increase investor confidence. It introduces not only rules for green bonds themselves, but also oversight of external reviewers, i.e. entities that assess whether an issue actually meets environmental requirements. The idea is to reduce the risk of a situation where a product is presented as „green”, although in reality there is insufficient basis to call it so.
In practice, this means that a company wishing to use the sustainable funding argument must ensure that all documentation is consistent. It should clearly demonstrate what the funds will be used for, how the project fits into environmental objectives and what data supports its compliance with relevant requirements. It is therefore not only the issuance documents that are relevant, but also how the money is spent, internal procedures and the content of disclosures to investors or counterparties.
The EU taxonomy is also important here. This is a set of EU criteria that helps to assess whether an economic activity can be considered environmentally sustainable. Put simply, the taxonomy is meant to answer the question of when a company or project actually supports environmental goals and when it is just a general statement. This gives investors, banks and business partners a common point of reference when assessing projects. For the entrepreneur, this means checking whether the planned investment actually falls within this framework and whether he can demonstrate this reliably.
This is important in international transactions, as foreign investors and financing institutions increasingly expect not only information about the company's financial position itself, but also structured ESG data and compliance with EU regulations. Missing documentation, inconsistent data or overly general communications can weaken a company's negotiating position, prolong the transaction and sometimes even lead to questioning of the assumptions presented.
That is why we support companies comprehensively in preparing for international transactions. We help you identify the legal risks associated with ESG, determine what obligations arise from regulations such as CSRD, ESRS or CSDD, and check what information investors, banks and counterparties can expect.
We prepare and organise documentation, help draft appropriate contractual clauses and support clients in discussions with foreign partners. We also advise on how to prepare the company for ESG reporting and how to structure the data that will later need to be included in the report or verified by the auditor.
In this way, the company does not act under pressure only when negotiations start, but builds a secure basis for talks with an investor or financing institution beforehand. The earlier the data, procedures and documents are sorted out, the easier it is to conduct negotiations, defend your valuation and reduce the risk of disputes. In cross-border matters, this is particularly important because, in addition to the regulations themselves, smooth communication with partners operating in different jurisdictions also matters. That is why we also support clients with multilingual support, including English and German, and for companies that want to implement ESG in stages, we also offer ongoing support under a legal subscription formula.
If this topic concerns you, call us +48 606608089 or write: sekretariat@bktkancelaria.pl . We would also be happy to arrange a meeting by video conference.
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