Some time ago, we reported on the Disclosure Regulation and explained the classification of financial products according to ESG in simple terms. Due to the positive response, we are starting our "Many shades of green" series with another topic to inform you about the latest developments regarding ESG and sustainability. Today's topic: The Corporate Sustainability Reporting Directive (CSRD for short)
The fact that listed companies must assume social responsibility and report on non-financial activities in the form of a CSR or sustainability report is nothing new and has also been mandatory for companies in the financial sector, such as banks, insurance companies and investment companies with 500 or more employees, since 2017. They are responsible for reporting on their contribution to environmental and climate protection, compliance with human rights along the supply chain and their stance on corruption and bribery, among other things. Standards such as the Global Reporting Initiative (GRI) or the German Sustainability Code (DNK) provide guidance for the structure of sustainability reporting. Due to the many possible interpretations and loopholes, this is often incomplete and the CSR activities of companies are difficult to compare. We also discovered this in our Whitepaper „ESG im Corporate Real Estate Management“, in which we examined the sustainability reports of the top 10 DAX companies and assessed their contribution to achieving climate protection targets.
In order to close these gaps and specify the framework requirements, the Corporate Sustainability Reporting Directive is to be adopted by the EU Commission in 2021 and applied for the 2023 reporting year. It also includes medium-sized companies with a balance sheet total of EUR 20 million, a turnover of EUR 40 million and more than 250 employees. Two of the above criteria are a prerequisite for the obligation. This means that around 15,000 companies are now affected in Germany and as many as 50,000 companies across Europe (instead of around 11,000 as previously). The extension to capital market-oriented SMEs is expected to follow a year later. In future, all three dimensions of ESG are to be taken into account in sustainability reporting, in line with the Taxonomy Regulation. Companies will be obliged to disclose their sustainability strategy and their contribution to achieving the 1.5 degree target as well as sustainability risks that may arise in the course of their business activities.
For this reason, we also want to call on companies that are not yet affected by this resolution to address this issue at an early stage - not only to make their contribution to climate protection, but also to avoid losing potential investors and investors due to a lack of transparency in their own sustainability measures.
Would you like to find out more about the status quo in sustainability reporting at DAX companies and are looking for recommendations for your own sustainability report? Then we recommend our white paper on this topic. You can download it here.
