1 January 2024 will finally bring sustainability reporting into the focus of companies and thus increasingly back into the eyes of the media and customers. This is because 2024 is the first reporting year for which the European Union’s Corporate Sustainability Reporting Directive (CSRD) applies. And even if this initially only applies to large EU companies, all other companies should also get on board – not least in terms of credible corporate communication.
Until last year, ESG reporting was still voluntary and could be based on different standards (e.g. the Global Reporting Initiative GRI, the regulations of the Sustainability Accounting Standards Board SASB or the Taskforce on Climate-related Financial Disclosure TCFD), but since the European Union’s Corporate Sustainability Reporting Directive came into force last year, the CSRD has gradually become mandatory for European companies. This means that in future, mandatory sustainability information must be disclosed in the general management report or annual report. From now on, it will no longer be sufficient to publish this information in another, separate document at the company’s own discretion. In addition, sustainability reporting will also require an external audit by an auditor in future.
Do not rely on the gradual introduction
Initially, this only applies to large EU companies (e.g. with more than 500 employees and/or a balance sheet total of €40 million or more). From the 2025 financial year, companies with more than 250 employees or a balance sheet total of more than €20 million will also be obliged to report on sustainability. From 2026, this will also apply in principle to small and medium-sized capital market-oriented companies. According to the CSRD, non-EU companies are not obliged to report until the 2028 financial year. However, this does not have to remain the case: The Frankfurt-based International Sustainability Standards Board (ISSB) is currently developing investor-oriented sustainability standards for non-financial reporting by companies, also taking into account EU regulations. And the first two standards were already published in 2023. It is therefore to be expected that these international standards will soon become mandatory for many non-EU companies. And smaller companies cannot sit back either, as companies in the supply chain of reporting companies are also required to report, regardless of their size.
What needs to be done in future
The points on which reporting must be based initially include a materiality analysis and stakeholder engagement, the definition of a sustainability strategy and the preliminary analysis of existing data. With the introduction of regulatory-compliant reporting, all necessary data must be collected and analysed and, if necessary, the corresponding systems and processes must be implemented. When the reporting obligation comes into effect, it will ultimately be necessary to establish monitoring of the underlying KPIs, prepare the CSRD-compliant report and arrange for an external audit of the quantitative sustainability report. This undoubtedly represents a major challenge for every company concerned, which cannot be overcome overnight. For this reason, all capital market-orientated companies should start dealing with the requirements now at the latest.
Sustainability reporting as a communicative opportunity
Not least from a communications perspective, however, it also makes sense to establish voluntary ESG reporting now that is as comprehensive as possible and, ideally, is set up in such a way that it can be used to develop reporting that fulfils the requirements of the CSRD in the future. In this way, the necessary data can be collected gradually and used now (without any claim to completeness) as part of the company’s own reporting, for acquisition purposes or for general sustainability communication. Whether as part of regular reporting, as a stand-alone sustainability report, as a code of conduct in customer acquisition or for other communicative purposes. The more data on which sustainability communication is based, the more credible it becomes (keyword “greenwashing”).
New Mark is happy to support its customers in this challenge and, above all, in utilising the resulting communication opportunities. From support in the search for a suitable service provider for the creation of quantitative content, to advice on initial voluntary reporting topics, the editorial preparation of content through to the realisation of the reporting document and the communicative use of sustainability reporting. In this way, sustainability reporting becomes not only a challenge to be overcome, but also an opportunity to credibly position your own company on sustainability issues.
