ESG and ESG reporting: the most important facts in brief

Importance of ESG in today's corporate world

In an increasingly sustainability-oriented world, the terms ESG (Environmental, Social, Governance) and ESG reporting have become indispensable. Companies are confronted with increasing demands from stakeholders to create transparency and assume responsibility. Initiatives such as the European Green Deal and regulations such as the Corporate Sustainability Reporting Directive (CSRD) are setting new standards and requiring companies to consider double materiality. This article provides a brief introduction to ESG, highlights the benefits of reporting and provides practical tips for implementation.

What is ESG?

ESG stands for Environmental, Social and Governance – the three central pillars of sustainable corporate governance:

  • Environmental: Measures to reduce CO2 emissions, energy efficiency, sustainable use of resources and protection of biodiversity.

  • Social: Responsibility for employees and society, including diversity, inclusion, fair working conditions and respect for human rights.

  • Governance (corporate management): Transparent decision-making processes, ethical standards, compliance and stakeholder orientation. In contrast to traditional CSR (Corporate Social Responsibility), ESG integrates measurable criteria that investors and other interest groups can evaluate.

Why is ESG reporting crucial?

Regulatory requirements

The European Green Deal aims to achieve climate neutrality by 2050 and lays the foundation for numerous regulations that affect companies. These include the CSRD, which requires comprehensive ESG reporting from 2024. Companies must take double materiality into account, i.e. both the company’s impact on the environment and society and the impact of external factors on the company.

Stakeholder expectations

Investors, customers and employees increasingly expect transparency and sustainable action. ESG is becoming a key criterion for investment decisions and long-term customer loyalty.

Competitive advantage

Companies that present ESG reports can differentiate themselves from competitors, minimize risks and gain access to new sources of capital.

Advantages of ESG reporting

  • Creating trust: Stakeholders value transparency and authenticity.

  • Minimize risks: A clear ESG strategy helps to identify and manage legal and financial risks.

  • Increase internal efficiency: The collection of ESG data reveals potential for optimization.

  • Improve market access: Institutional investors in particular prefer companies with strong ESG performance.

Practical steps for preparing an ESG report

1. define goals

Identify the ESG aspects relevant to your company. The double materiality as a guiding principle will help you here. We have compiled further information on conducting a double materiality analysis for you.

2. collect data

EFRAG has compiled a list of all ESRS data points that must be published to fulfill the CSRD (depending on the materiality analysis). Among others:
  • Environment: Energy consumption, Scope 1, 2 and 3 emissions, …

  • Social: Employee key figures, number of training hours, …

  • Governance: violations of anti-corruption and anti-bribery laws, information on payment practices, …

3. use frameworks

Rely on proven standards such as the Global Reporting Initiative (GRI), the European Sustainability Reporting Standards (ESRS) or the UN Sustainable Development Goals (SDGs).

The ESRS again offer a distinction between the comprehensive rules for larger companies, the LSME standard for listed SMEs and the voluntary ESRS VSME report for SMEs.

4. structure reporting

Ensure transparency by using clear and comprehensible data presentations. Avoid greenwashing by supporting your data with evidence.

5. involve stakeholders

Conduct a stakeholder analysis and gather feedback from investors, customers and employees to continuously improve your reporting.

6. select software (optional)

ESG software solutions can break down the often complex requirements for users and support the entire process, from materiality analysis and data collection to the preparation of the sustainability report. Our software selection guide may be helpful.

Challenges in ESG reporting

  • Data availability: The collection and validation of relevant ESG data is often complex.

  • Regulatory requirements: Compliance with CSRD and other regulations requires extensive knowledge and resources.

  • Avoid greenwashing: Companies must ensure that their reports are credible and substantiated. Beware of green claims.

Conclusion: Why act now?

ESG reporting is not just an obligation, but an opportunity to position yourself as a sustainable and future-proof company. By complying with the CSRD and taking dual materiality into account, companies can secure competitive advantages in the long term.