Sustainability Reports in Corporate Communications
Sustainability is no longer just a trend, but an essential part of corporate management and communication. In Europe in particular, the Corporate Sustainability Reporting Directive (CSRD) has significantly tightened the requirements for companies to report transparently and comprehensively on their sustainability performance. Large European companies such as Siemens, SAP and Unilever are pioneers in this regard and set standards for sustainability communication. Their comprehensive sustainability reports not only serve to meet legal requirements, but also to provide transparent information to their stakeholders. But what exactly is behind the CSRD and what requirements must companies meet?
What is the CSRD and what is a sustainability report and how extensive are they?
The Corporate Sustainability Reporting Directive (CSRD) is an EU directive that requires companies to publish detailed information on their sustainability activities. The CSRD replaces the previous Non-Financial Reporting Directive (NFRD) and significantly expands both the circle of companies required to report and the scope of reporting. A sustainability report covers a wide range of topics, including environmental, social and governance (ESG) aspects, and provides comprehensive insight into a company's sustainability strategy and performance. These reports can be several hundred pages long and require in-depth analysis and documentation of the company's sustainability practices.
Who is sustainability communication aimed at?
Sustainability reports are aimed at a wide audience, including investors, customers, employees, suppliers, the public and regulators. They serve to build trust, promote transparency and document corporate responsibility in the areas of environment, social issues and corporate governance. Investors and analysts are increasingly using these reports as a basis for their decisions, which further increases the importance of accurate and comprehensive reporting.
Which companies are affected?
Preparing a sustainability report is already mandatory for many companies. With the CSRD, reporting obligations will be extended to a large number of companies from 2024, including all large corporations and listed companies, regardless of the industry. This also applies to smaller companies if they are subsidiaries of larger groups or if they exceed certain sales and employee limits. The reporting requirements are no longer voluntary, but are required by law. Here is an overview of the companies that currently have to report and those that are new to the CSRD. Companies currently required to report (under the NFRD) are:
1. Large capital market-oriented companies: Companies that are already listed on the stock exchange and have more than 500 employees.
2. Financial institutions: banks, credit institutions and insurance companies that reach this size.
3. Large public enterprises: Enterprises that are majority owned by the state or public bodies, provided they meet the same criteria as large capital market-oriented enterprises.
These companies have previously had to prepare and publish non-financial information, i.e. sustainability reports, within the framework of the Non-Financial Reporting Directive (NFRD).
Newly added companies (through the CSRD):
The CSRD significantly expands the circle of companies subject to reporting requirements. From 2024, the following companies will be added:
1. All large companies , regardless of stock exchange listing: The new reporting requirements now apply to all large companies that meet two of the following three criteria:
More than 250 employees,
A balance sheet total of more than 20 million euros,
A net turnover of more than 40 million euros.
2. All listed companies on EU markets, including small and medium-sized enterprises (SMEs): However, there is a transition period for SMEs until 2026 before they have to report fully.
3. Non-European companies with significant turnover in the EU: Companies based outside the EU that generate more than 150 million euros in turnover in the EU and have at least one subsidiary or branch in the EU will also be required to report in the future.
4. Large subsidiaries of reporting entities : Subsidiaries that are part of a group subject to the new CSRD requirements will also be subject to reporting requirements.
Who writes these reports in companies?
Preparing a sustainability report is an interdisciplinary task that is often coordinated by dedicated sustainability teams, corporate communications or the legal department. External consultants and agencies play a central role in supporting companies in collecting data, preparing reports and complying with the relevant standards. They bring expertise in ESG reporting, materiality analyses and regulatory requirements and help to meet the often complex requirements of the CSRD.
What should be included in a sustainability report?
A sustainability report typically includes information on environmental aspects (such as CO₂ emissions, energy consumption), social aspects (such as working conditions, diversity) and governance practices (such as compliance and corporate ethics). In addition, risk analyses, the presentation of objectives and measures and reporting on progress in implementing sustainability goals are central components. The report must clearly and comprehensibly show how sustainability is integrated into the company's overall strategy.
According to which standards are the reports prepared?
The reports are prepared according to international standards such as the Global Reporting Initiative (GRI) Standards, the Sustainability Accounting Standards Board (SASB) Standards and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). These standards provide a structured framework that ensures that reporting is comparable, understandable and credible.
How do manufacturing, trading and service companies differ in their sustainability reports?
The differences in reporting depend heavily on the specific sustainability challenges of each industry. Manufacturing companies often place particular emphasis on environmental impacts, such as energy consumption and emissions. Trading companies focus on supply chain management and social standards, while service companies often highlight governance issues and social aspects. Despite different focuses, compliance with reporting standards is mandatory for all industries.
How much effort is involved in preparing a sustainability report?
The effort required to produce a sustainability report can be significant and take several months. This includes collecting and evaluating large amounts of data, coordinating between different departments and complying with legal requirements. The time and cost involved can be a challenge, especially for medium-sized companies, but the benefits often outweigh the disadvantages.
What are the benefits of preparing a sustainability report for companies?
In addition to the effort involved, which should not be underestimated, the preparation of a sustainability report also offers companies advantages. For example, intensive consideration of materials, processes and supply flows and their impact on the environment often results in potential savings that can have ecological and economic benefits. Reporting promotes transparency and trust among stakeholders both internally and externally, facilitates access to capital markets, strengthens brand reputation and supports compliance with regulatory requirements. In addition, the report helps to identify risks at an early stage and implement measures to improve sustainability performance. One example is the rising costs of CO2 emissions. If you know which processes are particularly CO2 intensive, you can think about alternatives at an early stage.
Sustainability reports: curse or blessing for companies?
From the perspective of company owners and managing directors, the mandatory preparation of a sustainability report can be seen as both a challenge and an opportunity. On the one hand, implementation requires considerable resources and, in some cases, a strategic reorientation. On the other hand, it offers the opportunity to position yourself as a responsible company, to stand out from competitors and to remain competitive in the long term. In particular, they provide information at an early stage about which adjustments (materials, processes) can or must be made in order to achieve certain goals. In the best case scenario, this can also result in savings potential. However, there is no guarantee that the sometimes time-consuming work on and documentation of these topics will actually result in economic advantages. Depending on the company's situation, sustainability reports are therefore sometimes just an additional cost block and sometimes very concrete assistance in improving economic and ecological efficiency. Since they are becoming legally mandatory for more and more companies, it makes sense to consider and work on them as part of the company strategy at an early stage.
outlook
With the expansion of the Corporate Sustainability Reporting Directive (CSRD), companies are facing even more extensive reporting obligations. While previously mainly large listed companies and some specific sectors such as banks and insurance companies were affected, all large companies, regardless of their stock exchange listing, as well as many SMEs and international companies with EU ties, must now prepare sustainability reports. This expansion is intended to provide more transparency in sustainability communication and ensure that companies comprehensively document their environmental and social responsibility.
Reports need to be more detailed and standardized. This means that companies that start implementing sustainability reporting early will have an advantage. The coming years will show which companies will rise to the challenge and use sustainability reporting as an opportunity to develop further.
Author:
Dr. Frank Lampe, independent online marketing consultant, author, lecturer and long-time marketing director for B2B technologycompanies and startups
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