In recent years, issues related to the environment, society, and corporate governance have gained increasing importance in both the global and domestic business landscapes. Serbia has laws regulating these areas, but questions arise as to how aligned they are with European standards and how effectively they are applied in practice. While there have been positive developments in the implementation of ESG (Environmental, Social, and Governance) principles, Serbian businesses and lawmakers still face numerous challenges. We discussed this important topic with Milica Pešterić, partner at the law firm Drašković Popović & Partners.
Q: How would you assess the current legal framework regarding ESG issues in Serbia?
A: In Serbia, there are legal regulations covering the environment, labor relations, occupational safety and health, respect for human rights, personal data protection and privacy, corporate governance, and almost everything else that constitutes ESG. Additionally, there are provisions on non-financial reporting within accounting and auditing laws. However, the extensive European legislation, which is evolving dynamically in this area, has not been adequately transposed, nor have state policies and strategies been devised to determine how domestic companies will navigate aligning their operations with ESG requirements, whether they are directly obligated or affected through value (supply) chains.
The primary initiative still lies with the companies themselves. However, it is easier for those who are part of international groups, as they can transfer policies and strategies from the group level and implement them more quickly locally.
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Q: What changes would you like to see in the future regarding ESG principles, both in legislation and business practices?
A: There is a lot, but I would highlight two key points. First, I hope the Women on Board Directive will be transposed into Serbian legislation through amendments to the Law on Business Companies. This would be accompanied by the implementation of leadership development programs for women in decision-making positions modeled after those of other Western Balkan countries. The primary goal of such programs is to strengthen and promote women’s leadership potential for participation on the boards of large corporations and prepare the business environment for the implementation of this directive.
The directive aims to improve gender balance among company directors and implement measures similar to those in force in the EU. Large companies in the EU are required to achieve at least 40 percent representation of non-executive board members or 33 percent of all directors from the underrepresented gender (i.e., women) by June 30, 2026.
The selection of candidates must be based on clear criteria and a comparative analysis of their qualifications. The criteria must be clear, gender-neutral, and unambiguous. Candidates are assessed based on their individual qualifications and merits, regardless of gender. Quality, competence, and professional capability are the key factors in the selection process. Companies that fail to meet the directive’s targets must submit a report explaining their reasons and the measures they are taking to address the shortfall. This directive represents a significant step toward achieving gender equality in corporate governance across the EU, fostering transparency, objectivity, and meritocracy in board member selection.
The second important point is the successful implementation of ESG criteria in the small and medium-sized enterprise (SME) sector, which I currently see as a significant challenge. To remain competitive within the value (supply) chain, SMEs will require comprehensive institutional support on this journey.
Q: What are some of the positive effects you’ve observed in companies that have implemented ESG standards?
A: I would highlight the understanding of ESG compliance as an opportunity, a chance, and a benefit rather than an imposed obligation. Primarily, this involves recognizing that ESG-compliant companies have access to various forms of green financing, creating opportunities for further business development. Beyond that, the business community has generally realized the importance of environmental protection, biodiversity, green energy, uncompromising respect for human and labor rights, and other ESG elements.
Interview by Milica Radičević
The inteview was published in the Energy portal Magazine RESPONSIBLE BUSINESS
