ESG and Tech – Mutual Connection Creating New Opportunities | Serbia

While technology has become indispensable to the modern world, tech companies have two ways in which they can influence development and accomplishment of ESG principles:

The Republic of Serbia has been focused on strategic development of start-up ecosystems and the IT sector in the previous decade; as a result, there are many opportunities for both inspiring start-ups and/or existing, as well as established tech companies, to provide solutions and to hop on the ESG bandwagon, creating a better world around them while also making a profit.   

Although ESG is a relatively new concept, most of its elements have existed for some time. It is not yet recognised/adopted in the Serbian legislation and no unified framework is in existence. However, most ESG elements have already been introduced into the Serbian regulatory framework on their own, making it that much easier to transition to a unified ESG framework when the time comes.

Non-financial reporting is the first (and only) ESG-related obligation in the Serbian legislation, even though it is only mandatory for large entities that have more than 500 employees, and Serbia has developed individual legislation, mostly in line with existing regulations of the EU.

Existing legislation includes all three aspects of ESG.

The new value-chain orientated ESG legislation in the EU – Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive, German Act on Supply Chain Due Diligence, etc – will definitely have an indirect impact on companies in Serbia, most of which are at some point included into value and supply chains of EU companies. Seeing that Serbia has an obligation to align itself with the EU legislation before becoming a member of the EU, it can be reasonably expected to see the EU ESG legislative framework implemented in Serbian legislation in the near future.

Tech companies are known for their often-unique way of conducting business, thinking and acting outside of the usual corporate box. Furthermore, tech companies are quick to dismiss their role in the implementation of ESG due to their often-low impact on the environment compared to other sectors. However, the environment is only one component of ESG (albeit the most prominent one) and there are lots of improvements for tech companies to implement in the social and governance sectors of their business.

The market is still developing in this regard and tech companies are just starting to realise their potential in implementing ESG standards in their everyday operations and seeing the benefits that it could have on their business. IT companies, in particular, in Serbia are mostly included in value chains of major international companies. As such, they will be obliged to implement all the latest ESG regulations in order to keep their businesses and develop them further.

Implementation of ESG standards and principles in the tech industry is not only an obligation and a cost, but it can also be interpreted as an investment. The workforce in the IT sector is scarce but the demand is high for high-level IT experts. Long-term implementation of ESG standards will not only ensure compliance with regulations, but also create a positive work environment where employees will be more willing to work and remain loyal to their employer, thus enabling the company to retain the best of the best and develop their business even further.

ESG is a great concept, but it is mostly still only that – a concept. As explained above, the regulatory framework is only just being adopted in global markets, with the EU leading the way for the rest of the world. However, it will take some time, trial and error to successfully apply ESG in practice. This opens up not only new business opportunities for legal, but tech experts as well. Combining legal and tech is set to be a winning formula in the current ESG market and a great development opportunity for both sectors.

ESG reporting and due diligence obligations, even in their infancy, have exposed a wide array of technical issues, including:

These are just some of many questions that the tech industry will need to answer, as well as being open to critical inputs from legal experts in order to get a working solution which can provide assistance to clients worldwide.

The tech industry has influenced law firms and legal businesses everywhere with the automatisation of processes, which will save many hours of manual labour, which can then be used for focusing on other high-value tasks. The use of AI or smart contracting tools, for example, was once seen as science fiction, but today it has already been implemented and used by clients and lawyers alike.

The implementation of ESG regulations and principles presents a unique opportunity for tech and legal companies to work together and create new solutions for new issues that are arising every day. The ESG market is not emerging; it is already there and with the combination of tech and legal expertise it will be enough to create some new services and, in the end, bring a profit to any company.