ESG and ESG reporting: the most important facts in brief
Find out what ESG reporting means, what benefits it brings and how you can benefit from CSRD and double materiality.
- ESG stands for Environmental, Social, and Governance: the three pillars of sustainable corporate governance.
- ESG reporting creates transparency for investors, customers, and other stakeholders, and can unlock competitive advantages.
- The CSRD now applies only to companies with more than 1,000 employees AND more than €450m net turnover (both criteria required, in force since 18 March 2026).
- Double materiality is at the heart of CSRD reporting: companies must assess both their impact on people and the planet, and how sustainability issues affect their business.
- Smaller companies outside the CSRD scope can voluntarily use the VSME standard (evolving into the broader "VS" Voluntary Standard) to communicate their sustainability performance.
In an increasingly sustainability-oriented world, the terms ESG (Environmental, Social, Governance) and ESG reporting have become indispensable. Companies face growing demands from stakeholders to create transparency and take 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 offers practical tips for implementation.
What is ESG?
ESG stands for Environmental, Social, and Governance: the three central pillars of sustainable corporate governance:
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Environmental: Measures to reduce CO2 emissions, energy efficiency, sustainable use of resources, and protection of biodiversity.
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Social: Responsibility for employees and society, including diversity, inclusion, fair working conditions, and respect for human rights.
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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 stakeholders can evaluate.
Why is ESG reporting important?
Regulatory requirements
The European Green Deal aims to achieve climate neutrality by 2050 and underpins numerous regulations affecting companies. The CSRD is the central piece of EU sustainability reporting legislation. Following the Omnibus reform package (in force since 18 March 2026), the obligation now applies only to companies with more than 1,000 employees AND more than €450m net turnover. Both criteria must be met cumulatively. Companies must apply double materiality: they assess both the company's impact on the environment and society, and the impact of external sustainability factors on the company's finances and operations.
The Omnibus reform significantly reduced the number of companies required to report under the CSRD. Reporting is now mandatory only for companies with more than 1,000 employees AND more than €450m net turnover (both criteria must apply simultaneously). Many companies that previously expected to fall into scope no longer do.
Stakeholder expectations
Investors, customers, and employees increasingly expect transparency and sustainable action. ESG performance is becoming a key criterion for investment decisions and long-term customer loyalty.
Competitive advantage
Companies that publish ESG reports can differentiate themselves from competitors, reduce risks, and gain access to new sources of capital.
Advantages of ESG reporting
- Build trust: Stakeholders value transparency and authenticity.
- Reduce risks: A clear ESG strategy helps identify and manage legal and financial risks early.
- Increase internal efficiency: Collecting ESG data reveals optimization potential across operations.
- 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. Double materiality as a guiding principle will help you here. We have compiled further information on conducting a double materiality assessment.
2. Collect data
EFRAG has drawn up a list of all ESRS data points that must be published to comply with the CSRD (subject to materiality assessment). Some examples:
| Pillar | Examples of data points |
|---|---|
| Environmental | Energy consumption, Scope 1, 2 and 3 emissions |
| Social | Employee headcount, training hours, diversity metrics |
| Governance | Anti-corruption compliance, payment practice disclosures |
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 offer a clear distinction between tiers: comprehensive rules for larger CSRD-obligated companies, the LSME standard for listed SMEs, and the voluntary VSME standard for SMEs. Note that the VSME is being broadened into the "VS (Voluntary Standard)," which will cover not only SMEs but also non-SME companies below the new CSRD thresholds.
4. Structure reporting
Ensure transparency through 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 simplify the often complex requirements and support you throughout the entire process, from materiality assessment and data collection to the final sustainability report. Our software selection guide can help you compare options.
Challenges in ESG reporting
- Data availability: Collecting and validating relevant ESG data is often complex, especially across supply chains.
- Regulatory complexity: Keeping up with the CSRD and other regulations requires substantial knowledge and resources.
- Avoiding greenwashing: Reports must be credible and substantiated. Check our guidance on green claims.
The double materiality assessment is the foundation of any ESG report under the CSRD. Our Excel-based template gives you a structured, step-by-step approach to identify your material topics efficiently.
Conclusion
ESG reporting is an opportunity to position your company as sustainable and future-proof. By understanding the CSRD and applying double materiality, companies can secure long-term competitive advantages.
Even companies outside the mandatory CSRD scope can benefit: the voluntary VSME standard (soon the broader "VS") allows smaller organisations to demonstrate sustainability credentials to customers, investors, and partners.
Frequently asked questions about ESG reporting
Who is required to publish an ESG report under the CSRD?
Since 18 March 2026, the CSRD applies only to companies with more than 1,000 employees AND more than €450m net turnover. Both criteria must be met at the same time. Many companies that previously expected to fall into scope are now exempt following the Omnibus reform.
What is the difference between ESG and CSR?
CSR (Corporate Social Responsibility) is a broader concept covering a company's voluntary contributions to society and the environment. ESG is a more structured framework that uses measurable criteria across Environmental, Social, and Governance dimensions, making it easier for investors and stakeholders to evaluate and compare companies.
What is double materiality in ESG reporting?
Double materiality means assessing sustainability topics from two directions: first, how your company's activities impact the environment and society (impact materiality); second, how sustainability issues such as climate risks or regulatory changes affect your company's finances and operations (financial materiality). The CSRD requires both perspectives.
What options do small companies have that are not required to report under the CSRD?
Smaller companies outside the CSRD scope can use the voluntary VSME standard (which is being broadened into the "VS (Voluntary Standard)") to communicate their sustainability performance. This is especially useful when CSRD-obligated customers ask for supply-chain sustainability data. CSRD-obligated companies may not require supply-chain partners with 1,000 employees or fewer to provide information beyond what the voluntary standard covers.