The strategic integration of sustainability reporting obligations in companies is becoming increasingly important, as the increasing transparency requirements will affect a large proportion of SMEs in the future.
The Corporate Sustainability Reporting Directive (CSRD) significantly expands the scope of corporate reporting obligations for social and environmental activities. In Germany, just under 15,000 companies will be affected in the future, compared to around 500 companies at present. Among other things, the CSRD requires companies to report on their sustainability strategies and objectives to identify the impacts, opportunities and risks along their own value chain as well as corresponding measures and key figures.
On 11 April 2024, ProduktionNRW organized an exchange of experiences for the NRW mechanical and plant engineering industry at LEMKEN GmbH & Co. KG in Alpen to present the effects of CSR reporting and explain them using a practical example. In addition, the focus was on an intensive exchange among the participants.
CSRD: Increased requirements for sustainability reporting
Judith Herzog-Kuballa, VDMA Environment and Sustainability Department, began by outlining the growing legal requirements in the area of sustainability reporting. One of the aims of the CSRD is to create more transparency and credibility in this area of corporate activities. In future, not only capital-oriented companies will be affected, but also all large corporations and limited liability partnerships. According to the EU definition, this applies to companies that meet at least two of the following criteria:
- over 25 million euros in total assets
- over 50 million euros turnover
- more than 250 employees
Smaller listed companies may therefore also be obliged to report on their social and environmental activities. One focus of the reporting obligations is on the materiality analysis, in which a sustainability aspect is considered “material” if it meets the criteria for either the materiality of the impact of the company’s activities (impact materiality), or for financial materiality, the opportunities and risks related to the company’s own business model (financial materiality), or for both. As a result, an examination of materiality is essential for companies subject to reporting requirements, for example in order to establish a suitable organizational and data structure.
In addition, companies required by the CSRD must also provide certain information on their economically green activities in their report as part of the Sustainable Finance Taxonomy. With the Taxonomy Regulation (EU) 2020/852, the EU is pursuing the goal of creating a framework to promote sustainable investment. Part of this framework is a European classification system for sustainable activities, which defines which economic activities will be classified as sustainable/ecological in the future.
Practical report: Implementation approaches for sustainability reporting
Ina Högele, Head of Strategic Projects, ESG and Legal at LEMKEN GmbH & Co. KG, and her ESG team presented the strategic approach to implementing the company’s own sustainability report. First, the Sustainable Development Goals (SDGs) of the United Nations were assigned to the ESG areas. Existing projects at LEMKEN were then assigned to the SDGs and new projects were identified. Prioritization was based on legal requirements such as the Supply Chain Due Diligence Act and the CSRD. The areas to be reported on were identified through a double materiality analysis and a stakeholder survey. The ESG team also deals with the recording of emissions in the company and along the value chain, the Supply Chain Due Diligence Act and the EU taxonomy in order to meet the statutory reporting requirements.
Exchange of experience and discussion
In the concluding discussion, the participants shared their experiences on various issues of the day. Among other things, resource planning for the preparation of a CSRD report was discussed. It proved promising to set up an interdisciplinary team below the management level. The inclusion of various locations in comprehensive reporting was also discussed, with the challenge being how to integrate them into the materiality analysis. In addition, however, it became clear that the participating companies are not yet able to implement many aspects of reporting despite their advanced level of knowledge, as the challenge is immense and many implementation issues are still unresolved.
Organizer
The event was organized by ProduktionNRW. ProduktionNRW is the cluster for mechanical engineering and production technology in North Rhine-Westphalia and is organized by VDMA NRW. ProduktionNRW sees itself as a platform for networking, informing and marketing companies, institutions and networks with each other and along the value chain. Significant parts of the services provided by ProduktionNRW are funded by the Ministry of Economic Affairs, Industry, Climate Protection and Energy of the State of North Rhine-Westphalia.