ESG
inherently harmful and wrong. In this context the emergence of ESG may offer the chance for the sector to prevent a further slide in public perception and maybe even reverse it.
CSRD will start on the 1st of January 2024 and apply as follows: • Financial years starting on 01/01/2024 – CSRD will apply to companies currently covered by the Non-Financial Reporting Directive (NFRD). This requires large public- interest entities to disclose information on Environmental, Societal, and Governmental (ESG) practices in regular non-financial statements • Financial years starting on 01/01/2025 – CSRD will extend to companies that are not presently subject to the NFRD, but meet at least 2 out of 3 criteria mentioned above • Financial years starting on 01/01/2026 – CSRD will further extend to small and medium-sized enterprises (SMEs) European gaming operators covered by the CSRD will be obliged to comply and have their ESG framework. There are other frameworks and standards in place beyond the EU which are similar to the CSRD such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SABS) which provide guidelines for sustainability reporting with ESG at their heart. However, it will remain the case that a sizeable part of the gaming sector in Europe will not have to adopt any ESG reporting. This begs the question as to why the gaming sector should step up and embrace ESG even if it is not be mandatory. Reasons for the gaming industry to embrace ESG One key reason that the gaming sector should embrace ESG is that it is a quick win. The sector already has the basis of ESG by virtue of the highly regulated environment it operates in, thus it makes sense to embrace it. Unlike other sectors, online gaming has by default already implemented many ESG measures. The Social element (which is heavily regulated through responsible gaming measures, good causes funding or the obligation to donate to charitable institutions) is already inbuilt in the culture of a regulated entity. The Governance part is a core competence of a gaming outfit second to that of offering games due to the plethora of regulations and license conditions that need to be complied with. The sector may not be as prepared on the environmental aspect, but neither it is a big polluter, and in any case, this is something that can be worked upon. The second big argument in favour of the sector’s adoption of ESG is that ESG rankings are rapidly becoming very influential in the formation of public opinion and can play a key role in
ESG – principles and applicability Environmental, Social, and Governance (ESG) refers to a set of principles that guide responsible business practices. The ‘E’ refers to environmental criteria, which consider how a company seeks to implement mitigation measures that reduce any negative impact on the environment, such as reducing by its carbon footprint. In the context of online gaming, this could be, for example, a decision to host its servers in territories where the carbon footprint is lowest. The ‘S’ refers to social criteria, which examine how a company manages relationships with its customers, its employees, its suppliers, and the communities where it operates. Responsible gaming measures, good cause funding, gender pay gap reduction, and inclusivity measures all represent examples of how a gaming operator may already be unknowingly addressing the ’S’ in ESG. The ‘G’ refers to governance and considers a company’s adoption of good governance standards, including compliance with laws and the regulatory framework that governs it. In the case of gaming, good governance and regulatory good standing would include licensing compliance, AML measures, adherence to company law, gaming tax compliance as well as leadership, internal controls and shareholder rights among other things. The adoption of ESG is relentlessly becoming a mandatory requirement for listed companies s in financial services and other industries where responsibilities around the ‘E’ and the ‘G’ of ESG may be familiar, but ‘S’ less so. In Europe, where EU Corporate Sustainability Reporting Disclosure (CSRD) requirements will soon come into force, ESG will take centre stage for all listed companies (including those in gaming), but could spill-over to other areas, albeit on a voluntary basis. CSRD requirements will apply to all large companies, including foreign subsidiaries, which meet at least two of the following criteria:
1. Balance sheet total: €20 million+ 2. Revenue: €40 million+ 3. Average number of employees in the year: 250
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IMGL MAGAZINE | JULY 2023
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