It doesn't get any greener!
Committing to new standards
Green light for new standards: While currently CO₂ accounting is not yet mandatory for medium-sized companies, global players are already increasingly obliged to make their CO₂ balance and greenhouse gases measurable. If they fail to do so, they will be punished with a poor ESG rating.
Numerous laws and regulations place obligations on you as a company. It is no longer a matter of wanting to, but of having to, if the 1.5-degree target defined by the Intergovernmental Panel on Climate Change is to be achieved. Let's act together now: It doesn't get any greener!
ESG stands for triad in harmony
What does sustainability mean?
There are many levels at which companies can act more sustainably. The basis for targeted sustainability concepts is always a realistic mapping of the actual situation and a solid data basis. This is why it is important to sort and cluster the different areas in a meaningful way. The classification into the three common pillars is very helpful here. This is because the term sustainability does not only refer to the environment, but is defined as a triad of environmental, social and good governance, or ESG for short.
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TRIAD IN HARMONY
ESG - ENVIRONMENT, SOCIAL, GOVERNANCE
Environment
ecological responsibility
Active climate protection
Adaptation to climate change
Sustainable use of marine and water resources
Change to a sustainable circular economy
Pollution prevention
Protection of biodiversity and ecosystems
Social
human responsibility
Fair working conditions
Health protection
Compliance with human rights (prohibition of child labor and slavery)
Equal opportunities and gender equality
Governance
economic responsibility
Ethical corporate governance
Prevention of corruption
Transparent reporting
Risk management
Corporate Sustainability Reporting Directive (CSRD)
Framework for sustainability reporting
The previously applicable EU directive on CSR reporting "Non-Financial Reporting Directive" (NFRD) is being replaced by the "Corporate Sustainability Reporting Directive" (CSRD). The CSRD fundamentally expands the requirements around sustainability reporting and demands detailed sustainability targets and key figures from companies. In particular, it places a new focus on risk management. With the implementation of the CSRD, companies should contribute to a more sustainable economy and society in Europe and in the future also operate within a firmly defined uniform framework, the new standards ESRS (European Sustainability Reporting Standards).
WHO DOES THE CORPORATE SUSTAINABILITY REPORTING DIRECTIVE APPLY TO?
All companies listed on an EU-regulated capital market (with the exception of micro-entities) are covered by the reporting requirement. In addition, all non-capital market-listed companies are subject to reporting requirements if they meet two out of three of the following criteria:
Balance sheet total > 20 million euros
Net sales > 40 million euros
Number of employees > 250
WHEN DO THE NEW CSRD RULES APPLY?
From the 2024 reporting year for all companies already subject to the NFRD (500 employees or more). (Publication of the 1st report in 2025)
From reporting year 2025 for large companies not currently subject to the NFRD (250 employees or more). (Publication of 1st report 2026)
Starting in the 2026 reporting year for listed small and medium-sized companies, as well as small and non-complex credit institutions and captive insurance companies (more than 10 employees). First report is mandatory in 2027 - with an opt-out until 2028.
European Sustainability Reporting Standards (ESRS)
New EU framework for sustainability reporting
While the CSRD provides the regulatory framework, the European Sustainability Reporting Standards define the content. Twelve reporting standards have been defined by the European Sustainability Reporting Standard Project Task Force and apply throughout Europe. These serve as a guideline for companies for their sustainability reports and define the structure of future corporate sustainability reporting for the entire spectrum of sustainability (environment, social and governance). Simplified standards will apply to SMEs.
German Supply Chain Duty of Care Act (LkSG)
Obligated to take responsibility
Previously, companies were only required to voluntarily comply with their human rights due diligence obligations in supply chains. But after too few complied with this requirement, companies will be forced to do so by law in the future. The German Supply Chain Due Diligence Act (Lieferketten-Sorgfaltspflichten-Gesetz, LkSG), also known as Supply Chain Act, will come into force on January 1, 2023. It requires companies with at least 3,000 employees to disclose their supply chains. From 2024, companies with 1,000 or more employees will also be affected.
Companies must transparently disclose their direct subcontractors and service providers along the entire supply chain. The aim is to improve the protection of human rights and ensure that basic human rights standards, such as the prohibition of forced or child labor, are observed.
THREE FUNCTIONS THE LAW IS INTENDED TO FULFILL:
Define what obligations companies have in protecting human rights and how they can meet them.
Require companies to report on and disclose their efforts
Workers are empowered in court regarding their rights
EU Taxonomy
Rules of the EU Commission
The EU Taxonomy is a set of rules of the EU Commission, which aims to promote ecologically sustainable business. CO2 reduction plays an important role in this. In addition, the EU Taxonomy is an essential component of the "European Green Deal". Its requirements have applied since January 1, 2022 to financial market participants that provide financial products in accordance with Art. 2 No. 12 of the Disclosure Regulation, as well as all companies that are subject to reporting requirements and thus have to prepare a sustainability report. However, numerous other companies are also indirectly affected by the EU taxonomy. In order to combat climate change and drive the reduction of environmentally harmful greenhouse gases, companies must first and foremost significantly reduce their CO2 emissions.
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Sustainable Finance Disclosure Regulation (SFDR)
EU regulation on disclosure requirements in the financial sector
The Sustainable Finance Disclosure Regulation, or "SFDR" for short, is a regulation on sustainability-related disclosure requirements in the financial sector. It aims to enable investors to compare different financial products in relation to environmental, social and corporate (ESG) objectives and to achieve returns based on long-term and sustainable investments. The SFDR is part of a comprehensive package aimed at aligning capital with sustainable business and countering greenwashing. Growth should not be profit-driven, but long-term and sustainable. For financial market participants, this results in disclosure obligations at both company and product level. With our software, we identify neuralgic points and make companies capable of acting for the future. Act now and be sustainable for longer. We take care of your company's CO₂ balance sheet and ESG rating. Get in touch now.
WHAT DO INVESTORS GET OUT OF SFDR?
Greenwashing of financial products is avoided
Sustainability standards are established
Comparability of products in ESG ranking
Sustainability risks and opportunities are captured
It raises the standard of sustainability in the financial world
The EU Supply Chain Directive
Strictly regulating what used to be voluntary
The EU Supply Chain Directive was submitted to the EU Commission in February 2022. If the draft is passed by the EU Parliament, EU member states must transpose the requirements into national laws within two years. The draft for the new directive is significantly stricter than the supply chain due diligence law currently in force in Germany. EU companies will be required to audit and disclose their suppliers along the entire global value chain - regardless of whether they have direct or indirect business relationships with them. The EU draft also significantly increases the number of companies held accountable. This sets a long-overdue standard for compliance with human rights as well as for ecological and economic action. It is about preventing child and forced labor, fair payment also in low-wage countries, avoiding exploitation, and generally about environmental protection and fair and sustainable business.
Entrepreneurship obligates
Laws and regulations
Businesses must respond to both regulatory and societal changes to remain competitive and play their part in sustainable economic transformation.
The UN formulates 17 sustainability goals. The global community has set itself the goal of implementing them together. With the 2030 Agenda, it aims to enable a decent life worldwide while permanently preserving the natural foundations of life.
EU action plan for financing sustainable growth.
The plan follows the Paris climate agreement. At its heart is the EU taxonomy regulation.
The SFDR is a regulation on sustainability-related disclosure requirements in the financial sector with the aim of aligning capital with sustainable business and counteracting greenwashing.
The requirements of the EU Taxonomy have applied to financial market actors since 2021 and to all companies required to prepare a non-financial statement since 2022
While the CSRD provides the regulatory framework, the ESRS define the content and set out the structure of corporate sustainability reporting for ESG areas. The ESRS are to apply from 2024.
It requires companies with at least 3,000 employees to disclose their supply chains. From 2024, smaller companies with 1,000 or more employees will also be affected. The law applies to Germany, and later in a significantly more stringent form throughout the EU.
Expansion of reporting obligations. They go hand in hand with the new ESRS standard. They also affect additional companies compared with the NFRD.