Shaping sustainability and creating transparency

In a rapidly changing world, the issues of environmental protection, social responsibility and responsible corporate management (Environmental, Social and Governance – ESG) are becoming increasingly important for companies, investors and the general public. Modern companies today face the challenge of not only being financially successful, but also making a positive contribution to society. ESG reporting not only serves to fulfill reporting obligations, but is also a tool with which companies can manage their sustainability goals and present them transparently.

What exactly is meant by ESG reporting and how can companies use their data to help shape the future? We explore these questions in this article.

What is an ESG report?

ESG reporting provides a comprehensive overview of a company’s environmental, social and governance activities.

But what exactly does the term ESG mean?

The abbreviation stands for Environmental, Social and Governance. Originally from the financial sector, ESG reporting served investors and other stakeholders as a basis for making informed decisions about sustainable investments. It enables the evaluation and comparison of ESG indicators.

Since 2017 ESG reporting is required by the Non-Financial Reporting Directive (NFRD) for insurance companies, banks and large listed companies in the EU. With the 2019 In the adopted “European Green Deal”, the EU has also set itself the goal of 2050 to become climate neutral. In order to achieve this goal, sustainable business practices are promoted, including transparency by companies regarding their sustainability measures.

ESG reporting therefore contributes directly to the implementation of the Green Deal.

What are ESG metrics?

ESG indicators play a central role for investors in the comprehensive analysis of companies. Companies that meet a variety of ESG criteria present themselves as responsible and sustainable actors in their reporting. Typical ESG indicators are CO2 emissions, energy and water consumption, waste generation, diversity within the company, fair remuneration of employees and the occurrence of corruption.

In addition, it is important for investors and other stakeholders to know how well prepared companies are for potential ESG risks in the future. These include in particular risks caused by climate change, such as extreme heat, water shortages or floods.

Who is obliged to provide ESG reporting?

While ESG reporting is currently voluntary for many, all capital market-oriented companies are already required to prepare a sustainability report. Due to the Corporate Sustainability Reporting Directive (CSDR), 01.01.2025 This obligation also applies to all large companies. These include

• limited liability partnerships
• Credit institution
• Insurance companies

However, the obligation to report on ESG only applies if large companies meet at least two of the following three criteria:

• At least 250 employees
• Net sales of at least 40 million euro
• Total assets of at least 20 million. euro

From the 01.01.2026 The ESG reporting obligation also applies to small and medium-sized enterprises if they are capital market-oriented and meet at least two of the following criteria:

• At least ten employees
• Balance sheet total at least 350,000 euros
• Sales of at least 700,000 euros

This allows investors to see where they are investing their money. Micro-enterprises and small and medium-sized enterprises that are not capital market-oriented remain exempt from the reporting requirement.

Objectives of ESG reporting

Why it is important: In today's business world, the demand for greater transparency is growing. Stakeholders such as investors, customers and employees want to know exactly how companies perform in the areas of environmental protection, social responsibility and good corporate governance.

: By providing detailed information about their ESG practices, companies can build trust while ensuring they act ethically and sustainably. This not only contributes to positive brand perception, but also helps minimize financial risks that can be associated with inadequate ESG practices.

Why it is important: Responsibility means that companies meet their obligations and are accountable for their actions and their impacts in ESG areas.

Effects: By setting clear goals and regularly reporting on progress and challenges, companies can ensure they stay on track and make adjustments where necessary. This builds trust with stakeholders and can improve business performance by taking proactive steps to identify and address potential issues.

Why it is important: ESG risks, such as environmental impacts or social challenges, can have significant financial and reputational consequences for a company. By identifying and managing these risks early on, companies can avoid or at least minimize potential problems.

: Integrating ESG factors into risk management enables companies to simultaneously protect themselves against loss-making fluctuations, future-proof their business model and take advantage of opportunities arising from exemplary ESG practices.

These three goals are closely linked and together can help to sustainably increase the company’s value and profitability.

Conclusion

In a world that increasingly recognizes the value of sustainability, ESG reporting is becoming an indispensable tool for companies. Through transparency, accountability and effective risk management, companies can not only meet their ethical and social obligations, but also strengthen the trust of investors, customers and employees. This is not just about fulfilling reporting obligations, but rather about actively shaping a sustainable and responsible corporate culture.

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Ralf Kothe

Ralf Kothe is Principal Consultant and Head of Group & Corporate Reporting at beratungscontor. PCS Beratungscontor AG is a medium-sized, owner-managed consulting firm that is one of the sought-after specialists for SAP Data & Analytics. Its customers include medium-sized companies and international corporations.