"Given the high level of professional and technical complexity and the involvement of various specialist areas and stakeholders, it is crucial to view ESG as a holistic process."
Cedric Baran, Senior Consultant
The goal: sustainable corporate governance through the implementation of ESG principles. The disclosure and communication of environmental, social and governance goals as well as a company's progress towards these goals poses challenges, but also offers great opportunities.
Take the lead for a sustainable future.
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Environmental, social and governance - Process
The sustainability reporting process starts with a comprehensive understanding of the entire value chain and the company's structures. Environmental, social and governance aspects can then be identified and the associated data collected.
We guide you from the basic understanding of the processes through the double materiality analysis to the evaluation and publication of your data. This allows you to create transparency about your sustainability performance without losing sight of the big picture. Through iterative adjustments, you can meet the changing needs and requirements of the company and satisfy your stakeholders.
Corporate Social Reporting Directive (CSRD)
The CSRD, an EU directive on sustainability reporting, was published in 2022 and requires companies to apply sustainable and responsible business practices and disclose their social and environmental performance.
It is gradually replacing the Non-Financial Reporting Directive (NFRD) and will require more comprehensive reports in accordance with uniform standards from 2024. The aim is to improve the measurability and comparability of report content. The obligation to publish the standards in the management report and a subsequent obligation for an external audit underlines the importance that will be attached to non-financial reporting in future. The roll-out will take place in phases based on the following roadmap:
- Phase 1: From January 2024 for companies already subject to NFRD reporting requirements
- Phase 2: From January 2025 for large companies that are not yet subject to NFRD reporting requirements
- Phase 3: From January 2026 for listed SMEs, smaller credit institutions and captive insurance companies
Large companies are those that meet two of the following three criteria
- Balance sheet total > 20 million euros
- Net turnover/income > 40 million euros
- At least 250 employees
On October 17th 2023, the EU Commission adopted a delegated act that raises the thresholds for the classification of companies and groups of companies. These must now be transposed into national law. Implementation in the member states must take place by 24.12.2024.
EU Taxonomy
The EU taxonomy is an integral part of the EU action plan for sustainable finance and an essential part of the strategy to become climate neutral by 2050.
Its aim is to make the financial market more transparent and protect it from greenwashing. To this end, six environmental targets have been defined, at least one of which companies must meet in order to be classified as sustainable.
1. Climate change mitigation
2. Climate change adaption
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity and ecosystems
European Sustainability Reporting Standards (ESRS)
The ESRS are the framework used to implement and define the CSRD.
The ESRS were developed in collaboration with stakeholders and experts by the European Financial Reporting Advisory Group (EFRAG) and adopted by the EU Commission in 2023. They consist of two overarching standards, which contain general requirements and principles, and ten thematic standards relating to environmental, social and governance aspects. Further sector-specific standards are planned for the future. Reporting is governed by the principle of double materiality (ESRS 1), which defines the scope of the information to be reported.
Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) aims to create a standardized language for sustainability.
The GRI guidelines are regarded worldwide as the leading standard for sustainability reports and are widely accepted by companies and investors. The standards are divided into three categories:
- GRI Universal Standards (for all organizations)
- GRI Sector Standards (for specific sectors)
- GRI Topic Standards (require disclosures on specific topics)
The ESRS cannot currently be replaced by the GRI, but the GRI-ESRS Interoperability Index has been available since November 2023, which allows the individual standards to be reconciled with each other.
Double materiality
Dual materiality considers two perspectives in order to adequately describe the influence of sustainability aspects.
The outside-in perspective (financial materiality) analyzes the impact of external sustainability factors on the corporate strategy, financial situation and long-term sustainability of the business model. The inside-out perspective (environmental and social materiality) looks at the consequences of the company's actions on sustainability aspects. An issue is considered material if it either harbors potential risks and opportunities for business success (outside-in) or if it is significant due to the impact of business activities on the environment and society (inside-out). The company must therefore both manage external sustainability risks and improve its own internal practices in order to pursue a comprehensive sustainability strategy. This includes the disclosure of strategy and governance with regard to the topic, information on measures implemented as well as targets and key performance indicators.
Your direct contact to our ESG Experts
Friederike Rombach
Lead Consultant