Environmental, Social, and Governance (ESG) principles are becoming increasingly important for companies worldwide, including those in Serbia.
Although Serbia does not yet have a comprehensive ESG regulatory framework similar to the EU’s Corporate Sustainability Reporting Directive (CSRD) or the Sustainable Finance Disclosure Regulation (SFDR), various regulations and international influences are shaping the expectations for businesses operating in the country.
Namely, certain aspects of ESG are covered by existing Serbian regulations:
- Environmental (E)
Serbian companies must comply with environmental laws, such as those related to waste management, air and water protection, and emissions reductions, which align with EU regulations under Serbia’s EU accession process.
- Social (S)
Labor laws, anti-discrimination policies, health and safety regulations, and corporate social responsibility (CSR) initiatives contribute to the social aspect of ESG.
- Governance (G)
Corporate governance in Serbia is regulated by the Companies Act, and listed companies must adhere to corporate governance codes, ensuring transparency and accountability.
Moreover, companies engaging in international transactions – such as exporting to the EU or partnering with multinational corporations – must increasingly adhere to ESG standards imposed by foreign partners.
Additionally, the EU’s Corporate Sustainability Reporting Directive (CSRD) could impact large Serbian companies operating in the EU to report on ESG matters.
The Environmental Aspect of ESG in Serbia
The Environmental (E) component of ESG focuses on a company’s impact on nature, including sustainability, pollution control, resource management, and climate change adaptation.
Several laws and regulations in Serbia govern environmental responsibility, requiring businesses to operate in a sustainable and legally compliant manner. The most significant ones include the Environmental Protection Act, Climate Change Act, Waste Management Act, Nature Protection Act, etc.
Serbian companies, especially those in manufacturing, energy, construction, and agriculture must comply with strict environmental regulations.
The Social Aspect of ESG: Employee Rights and Corporate Responsibility
The Social component of ESG focuses on how companies treat their employees, customers, and communities. In Serbia, various labour and employment laws already impose social responsibility obligations on businesses.
Key legislation includes the Personal Data Protection Act, Gender Equality Act, Antidiscrimination Act, and labour-related regulations, among others.
While these laws were not explicitly designed with ESG in mind, they establish essential obligations that align with ESG principles.
For example, the Personal Data Protection Act safeguards individuals’ rights by regulating how companies collect, process, and store personal data. Compliance with this law is crucial for businesses handling employee and customer data, ensuring transparency and ethical data management.
Similarly, laws such as the Gender Equality Act and Antidiscrimination Act promote fair treatment in the workplace, reinforcing the social pillar of ESG by requiring companies to implement non-discriminatory policies and provide equal opportunities for all employees.
1. Employee Rights and Workplace Policies
Serbia’s Labor Law establishes fundamental employee protections, including fair wages, workplace safety, and non-discrimination. However, as ESG principles gain importance, companies are increasingly going beyond legal requirements to introduce additional benefits and formalize them through internal policies.
ESG-conscious businesses in Serbia are expected to foster a responsible and ethical work environment by implementing policies that address employee well-being, inclusion, and fairness.
In practice, this includes:
- Ensuring a safe and inclusive workplace
Companies must comply with occupational health and safety regulations and adopt Mandatory Anti-Harassment Policies and Procedures to prevent workplace misconduct and discrimination. Beyond these, companies also implement diversity and inclusion programs to ensure equal opportunities for all employees.
- Supporting employee well-being
Many companies introduce work-life balance initiatives, such as Remote and Hybrid Work Policies, flexible working hours, mental health support programs, and paid parental leave enhancements. These initiatives promote productivity, retention, and employee satisfaction.
- Adopting transparent hiring and promotion policies
To demonstrate a commitment to ESG, businesses are establishing clear guidelines for fair recruitment, career advancement, and equal pay policies to eliminate bias and promote merit-based growth.
2. Diversity, Equity, and Inclusion (DEI)
Serbia has mandatory anti-discrimination laws, ensuring equal treatment and protection from (workplace) bias. However, companies that go beyond mere compliance and actively promote Diversity, Equity, and Inclusion (DEI) initiatives often benefit from increased innovation, higher employee engagement, and improved productivity.
As businesses strive to enhance DEI, Artificial Intelligence (AI) is increasingly being used to support fair and unbiased decision-making in recruitment and workplace management. While AI has the potential to streamline hiring processes, reduce human bias, and promote workplace inclusivity, it also raises concerns about algorithmic bias, transparency, and data privacy.
By embedding DEI principles into AI-driven processes, Serbian companies can strengthen compliance, create fairer workplaces, and align with ESG commitments. However, they must also ensure that AI systems adhere to ethical AI standards, Serbian labor laws, and data protection regulations, particularly under the Personal Data Protection Act.
3. Human Rights and Supply Chain Responsibility
Businesses operating in Serbia are increasingly expected to ensure ethical sourcing and fair labor practices within their supply chains.
This is particularly relevant for companies working with international partners who require ESG compliance from their suppliers.
- Conducting due diligence on suppliers.
- Ensuring workers throughout the supply chain are treated fairly.
- Preventing forced labor and child labor.
The Governance Aspect of ESG: Transparency and Ethical Business Practices
Corporate governance is a key pillar of ESG and is essential for building trust with investors, regulators, and the public. Serbian companies are increasingly expected to adopt transparent governance practices to remain competitive in the market.
Good governance is particularly important for companies seeking foreign investments or partnerships, as it signals credibility and stability.
1. Regulatory Compliance and Ethical Conduct
While Serbian corporate governance rules are largely shaped by the Companies Act and Securities Law, ESG standards push businesses to go beyond legal minimums.
In practice, companies are increasingly implementing additional procedures and policies to strengthen governance and align with both Serbian regulations and global best practices. This is particularly relevant for subsidiaries, branches or representatives of international companies, which are often required to adopt group-level policies. To ensure compliance with Serbian law, companies should regularly review and update existing group policies to reflect local legal requirements.
Key governance initiatives include:
- Anti-Bribery and Corruption Policies
Establishing internal controls, risk assessments, and reporting mechanisms to prevent fraud and bribery. Many international companies implement group-wide anti-corruption frameworks, which should be reviewed to align with Serbian anti-corruption laws.
- Whistleblower Protection
Under Serbian law, companies with more than 10 employees are required to adopt a mandatory whistleblower protection policy. This ensures that employees can report unethical behavior, corruption, or legal violations without fear of retaliation. Companies that are part of international groups should align their whistleblower policies with Serbian legal requirements to maintain compliance.
- Board Accountability and Ethical Leadership
Clear governance structures should ensure independent decision-making, ethical leadership, and transparency in corporate affairs. Many companies implement codes of ethics and conduct that regulate conflicts of interest and ensure responsible decision-making at the board level.
2. Data Protection and Privacy
With increasing digitalization and reliance on data-driven business models, companies must prioritize data protection and cybersecurity as a fundamental part of their ESG strategy. In Serbia, the Personal Data Protection Law (PDPL) is closely aligned with the EU General Data Protection Regulation (GDPR), imposing strict obligations on businesses that collect, store, and process personal data. Non-compliance can lead to substantial fines, reputational damage, and loss of consumer trust.
To meet these obligations and align with best practices, companies should implement comprehensive internal policies and procedures to ensure the confidentiality, integrity, and availability of personal data. This includes access controls, encryption, secure storage, and incident response plans to minimize the risk of data breaches and unauthorized access.
Additionally, periodic internal audits help identify compliance gaps, potential vulnerabilities, and areas for improvement. Businesses should assess how they collect, store, transfer, and delete personal data to ensure full compliance with Serbian data protection laws.
Finally, employee awareness is one of the most critical elements of data security. Companies should provide regular training sessions to educate employees on handling personal data, recognizing phishing attempts, preventing human errors, and understanding their legal responsibilities under the PDPL.
3. ESG Reporting and Transparency
Although EU’s ESG reporting is not yet mandatory in Serbia, companies with international ties may already face reporting obligations due to the EU Corporate Sustainability Reporting Directive (CSRD) and its extraterritorial application.
Additionally, an initial framework for non-financial reporting exists under the Serbian Accounting Act, which applies to certain large entities of public interest in the Republic of Serbia. This reporting obligation requires Serbian companies to disclose information on environmental, social, human resources, anti-corruption, and human rights matters, making it a de facto ESG reporting requirement.
Why ESG Compliance is a Business Opportunity
While some businesses view ESG requirements as additional regulatory burdens, forward-thinking companies recognize them as opportunities for growth. ESG-conscious businesses are more attractive to investors, enjoy better customer loyalty, and have higher employee satisfaction.
Furthermore, ESG compliance plays an increasingly crucial role in mergers and acquisitions (M&A), particularly when Serbian companies are acquired by EU or US firms.
Acquiring companies often conduct ESG due diligence to assess risks related to labor practices, regulatory compliance, and governance structures.
For Serbian companies, poor ESG performance can result in:
- Lower valuation due to reputational risks or potential liabilities.
- Deal-breakers, as investors may see ESG risks as too significant.
- Operational integration challenges, if governance or social policies do not align with international standards.
By proactively improving ESG compliance, Serbian businesses can enhance their attractiveness to foreign investors and secure better terms in cross-border transactions.
How Your Business Can Get Started with ESG Compliance
If your company is looking to improve its ESG performance, here are some key steps:
- Conduct an ESG Assessment
Identify gaps in compliance and areas for improvement.
- Develop Internal Policies
Update company policies to reflect ESG commitments.
- Train Employees
Ensure that staff at all levels understand their role in ESG compliance.
- Seek Professional Guidance
Partner with legal and ESG experts to navigate regulatory complexities.
As ESG standards continue to shape the business landscape, Serbian companies must stay ahead by integrating responsible environmental, social, and governance practices into their operations.
