Application of ESG criteria is a challenge, but also a chance for greater competitiveness and export

The readiness of companies to invest in technology and innovations for the green transition, the financial sector to support such investments, and the relevant institutions to establish clear regulatory guidelines for the application of ESG standards are among the key mechanisms to better prepare the Serbian economy for the implementation of sustainable goals and business practices, in line with EU standards. It is important for Serbia to follow ESG practices and regulations, but also to adapt them to the domestic economy.

This was the conclusion of representatives from corporations, small and medium-sized enterprises, startups, the scientific community, institutions, the banking sector, and civil organizations at the roundtable "ESG Criteria – Incentive and/or Limitation for Economic Development and Competitiveness," organized by NALED with the support of the Swedish International Development Cooperation Agency (Sida).

- ESG regulations bring numerous challenges faced by all EU economies and all participants in supply chains, with even greater pressure on the economies of the Western Balkans, including Serbia. However, an adequate response to these demands and the application of ESG standards can be an opportunity for our economy, not only to halt the lag behind European economies but also to reverse this process, enhance competitiveness, and increase presence in EU markets, emphasized Vladislav Cvetković, Director of Business Consulting at PwC.

He presented the Carbon Footprint and Sustainability Analysis in Primary Crop Production, initiated and developed by NALED in collaboration with PwC, with the support of Sida, as part of the project "Public Procurement and Good Governance for Greater Competitiveness." The research was conducted across the entire chain from field to table, and the findings show that this industry emits six million tons of CO₂ annually. Of this, 66% comes from primary production, while the processing sector generates 24%. It is crucial to transition from conventional to regenerative agriculture, as this sector accounts for 7% of GDP and constitutes 18% of Serbia's total annual exports.

For industries affected by the EU's CBAM directive, which involves the introduction of cross-border CO₂ emission taxes, such as the cement industry, it is important to enable the use of renewable energy sources and alternative fuels in production, it was stated at the roundtable.

Rade Mrdak, Assistant Minister of Mining and Energy, noted that the Serbian Government plans to reduce CO₂ emissions by 33% compared to the 1990 period through a series of strategic documents, which have already begun to be adopted, and concrete measures in the coming years, while also facilitating the initial implementation of CBAM regulations for industries. In this regard, Mrdak announced the adoption of a new Energy Law next year.

- We are honest with the economy regarding the speed of decarbonizing the energy sector, but we do not want to be hasty, taking into account the security and stability of the system. We have engaged experts and started work on an Analysis of Models for Determining Carbon Footprint Pricing, which should be completed by autumn. By 2030, we aim to have every second kilowatt-hour of electricity come from green energy, emphasized Mrdak.

In addition to systemic support for large companies and corporations, which have made the most progress in the ESG transition, additional assistance will be needed for small and medium-sized enterprises, which make up 90% of business entities in Serbia and contribute about 50% to GDP, to maintain their competitive position in supply chains and leverage the ESG potential for growth and new value creation.

Participants also agreed on the importance of connecting science and industry in the transition to sustainable business practices. Smiljana Krivokuća, Director of BIO4, pointed out that the state will strategically strengthen and direct the joint creation of innovative solutions towards accelerating the green and digital transition through campus work. Milena Popović Martinelli from EBRD highlighted that there are funding sources for green projects and that it is necessary to secure grants for innovative investments.