Photo author: Elena Glomazdo<\/p>\n
ESG \u2013 Environmental Social and Corporate Governance<\/em><\/strong> is an important set of standards that provide information on company environmental and social impact. ESG is not only important in regular business activities, but also in insolvency and restructuring. What are the reasons for taking care of ESG in company distress?<\/p>\n <\/p>\n Firstly, this might be important for potential lenders to the distressed company. The financing of the debtor in possession may be crucial for the feasibility of the reorganization plan and it’s further realization. Besides the payment of pre-petition debts, there are many costs on which the debtor in possession must count, such as ordinary business expenses, taxes, consultant\u2019s fees (lawyers, accountants, tax advisors, supervisor of the reorganization plan), post-petition creditors. Therefore, the potential for obtaining new lending may be compromised if the company does not adhere to ESG standards.<\/p>\n Secondly, as the importance of ESG is growing, to retain or attract customers, ESG can play a role in the company\u2019s further business activities. Breach of ESG standards may influence company solvency, market image and endanger performance of the contracts.<\/p>\n Thirdly, compliance with ESG standards can contribute to cost reductions, for example in energy costs, waste management, avoidance of pollution related costs and fines.<\/p>\n