The nature of management and the demands placed on it are changing. The traditional approach to reporting on enterprises from an external perspective, which is largely shaped by the financial world, has become outdated. Due to current ecological and social developments, a more holistic approach is required. The aim here is not only to focus on key financial figures, but also to report on sustainability aspects, i.e. an enterprise’s environmental, social and corporate activities and performance. There are also feedback loops to be found here, as sustainability factors are playing an ever greater role in the financial world and are increasingly important for access to capital. The aim of sustainability reporting is to make the impacts of corporate activities on the climate, the environment and society more visible. Enterprises can strengthen their credibility and generate competitive advantages through transparent reporting.

The Corporate Sustainability Reporting Directive (CSRD) is an EU directive on sustainability reporting that came into effect on 5 January 2023. The aim of the CSRD is to make non-financial reporting equivalent to financial reporting. 

Enterprises must disclose sustainability information as part of their management report. This is based on the European Sustainability Reporting Standards (ESRS), which define standardised and binding requirements. The reporting covers the areas of environment, social affairs and governance (ESG). This takes into account the enterprise’s impacts on the environment and society as well as financial sustainability risks for the enterprise.

In addition to specific key figures and a target/actual analysis, enterprises must disclose planned measures, potential risks, their business strategy and sustainability opportunities. Information along the value chain also forms part of the reporting to ensure transparency on sustainability aspects.

The CSRD reporting obligation for all financial years beginning after 31 December 2024 previously applied to large companies under accounting law. This means all enterprises that fulfil at least two of the following three characteristics:

• Balance sheet total: at least EUR 20 million
• Net sales revenue: at least EUR 40 million
• Average number of employees: at least 250

With the publication of the first 'omnibus package' by the EU Commission on 26 February 2025 and its proposals for changes and simplifications to sustainability reporting, the thresholds for enterprises subject to reporting requirements may change.

• Balance sheet total: at least EUR 25 million
• Net sales revenue: at least EUR 50 million
• Average number of employees: at least 1,000

The European Sustainability Reporting Standards (ESRS) are the EU-wide standards for sustainability reporting and define the sustainability information that an enterprise must report in accordance with the Corporate Sustainability Reporting Directive (CSRD). In particular, the ESRS define the information that an enterprise must make disclosures relating to its material impacts, risks and opportunities in relation to sustainability aspects. In particular, the standards contain guidelines on environmental, social and governance issues. There are three categories: general standards, thematic standards (environmental, social and governance standards) and, in future, sector-specific standards. Around 49,000 enterprises across the EU, including around 15,000 in Germany, are required to apply the ESRS. The aim of the ESRS is to improve the comparability, transparency and quality of reports in the EU and make them comparable.

The EU taxonomy provides a classification system for environmentally sustainable economic activities. On the basis of predefined criteria, a sector-specific classification is to be made as to whether an enterprise reports 'green' sales revenues, investments or operating expenses. The requirements were already applicable to capital market-oriented enterprises for the first time for financial year 2021. The CSRD means the mandatory classification will be extended to a significantly wider circle of users and become part of future sustainability reporting.

The publication of the EU Commission’s first 'omnibus package' on sustainability reporting resulted in the publication of proposed amendments to the EU taxonomy for enterprises subject to reporting requirements. There is currently a certain amount of legal uncertainty surrounding this.

The materiality analysis, mandatory under ESRS 1, is a central component of sustainability reporting under the European Union’s Corporate Sustainability Reporting Directive (CSRD). It helps enterprises identify the issues of crucial importance to both the enterprise itself and its stakeholders. Materiality is based on 'dual materiality', a consideration of the enterprise’s impacts on the environment and society as well as the impacts of environmental and social factors on the enterprise. This materiality analysis helps enterprises to identify and assess their impact, risks and opportunities. On this basis, enterprises determine the relevant topics for their sustainability reporting. These topics are also important for the strategic direction of the enterprise.

By intensively examining ESG issues and internal corporate processes by means of analyses within the scope of sustainability reporting, it becomes possible to question and optimise established processes. This exercise can lead to efficiency gains and cost savings while improving the enterprise’s competitiveness. Examining these issues also helps to identify opportunities and risks at an early stage. Good risk management enables the enterprise to react quickly to risks in a constantly changing world. Sustainability reporting also offers advantages from a financial perspective, as sustainability risks are increasingly being factored into financing decisions. Critically analysing ESG issues also promotes the development of innovative solutions. Other benefits include improved employer branding and reputation protection by establishing greater trust and credibility among customers and other stakeholders.

Enterprises that fall under the CSRD and are subject to reporting requirements must undergo an external audit. The CSRD stipulates an obligation for the auditor to audit the sustainability information. One aim of this is to put sustainability reporting on an equal footing with financial reporting in future. Enterprises that report voluntarily are exempt from this obligation as long as they are not subject to legal requirements. Voluntary reports can nevertheless be audited externally in order to increase the credibility and reliability of their information.