Es lohnt sich für Unternehmen, wenn sie eine Nachhaltigkeitsstrategie entwickeln.

30.04.2024

Guide: How do I develop an effective sustainability strategy for my company?

Developing an effective sustainability strategy makes companies fit for the future and secures competitive advantages. This guide shows you step by step how to create a long-term plan for the future with social and environmental practices.

Developing a sustainability strategy is essential to make your company fit for the future.
The crucial point here is that you can tackle the key issues in a targeted and structured manner on the basis of the strategy.
In other words, minimize negative impacts, drive positive developments, reduce risks and seize opportunities.
This results in 5 clear advantages for your company:

Competitive advantages
Strategic planning
Better image
Greater customer loyalty
Greater attractiveness for talent

We present these benefits to you in more detail in the blog post “5 reasons for a sustainability strategy“.
Now we want to show you how to develop an effective sustainability strategy step by step.
We want to dive deeper into the development of such a roadmap for the sustainable transformation of your company.
This guide will take you through the entire process.
We look at how you can

Identify key issues,
Define suitable measures and goals
and ultimately arrive at an effective strategy.

This gives you a holistic focus on ESG issues and the implementation of environmental, social and governance aspects.

How do I develop a sustainability strategy for my company?

“Lack of concrete goals and KPIs” – this is one of the biggest obstacles to sustainable transformation in companies, as the Bertelsmann Stiftung’s Sustainability Transformation Monitor 2024 shows.
The lack of resources – both monetary and human – also plays a major role.
A sustainability strategy provides the solution here.
It contains concrete goals and key figures to monitor progress.
And it focuses on the most important issues so that human resources can be deployed efficiently.
However, there are other important steps in the development of an effective ESG strategy, which we will now take a closer look at.

1. status quo and key topics

To know where you want to go, you first need to know where you stand.
This is also the case when you are developing your sustainability strategy.
You determine the current state of your company using a status quo analysis.
This is your first data collection in the ESG area, so to speak, and should therefore be carried out thoroughly.
The data and information form the basis for your future sustainability efforts.
These topics, among others, play a role in determining the status quo:

Wichtige Fragen, um den Status quo Ihres Unternehmens im Bereich Nachhaltigkeit zu ermitteln, und wo Sie die Antworten finden.

The first time, the status quo analysis usually involves a great deal of effort.
Numerous departments have to be involved.
In some cases, the data is not available in the required form or has not yet been collected.
The VERSO ESG Hub simplifies and optimizes data management, as it is aligned with the ESG requirements of standards such as ESRS, GRI and DNK.
The analysis of the current status serves as the basis for the following materiality analysis.
Here you determine which sustainability issues are most important and where the greatest impacts, risks and opportunities (IRO) lie.
If you publish a sustainability report in accordance with CSRD, you must carry out a double materiality analysis here.
A simple materiality analysis is also sufficient for a DNK report.
Both procedures involve a certain amount of effort – the VERSO Sustainability Experts are therefore available to support you.
The results of the materiality analysis are your fields of action and the specific IROs.

2. define SMART objectives and suitable measures

Based on the key topics, you define targets and KPIs for monitoring as well as suitable measures to achieve the targets set.
You are at the center, so to speak, when you develop a sustainability strategy.
When defining objectives, rely on science-based support.
For example, use the GHG Protocol (Greenhouse Gas Protocol) or projects within the framework of the Paris Climate Agreement as a guide.
You can find industry-specific assistance from the Science Based Targets Initiative (SBTi), for example.
Make sure that you set yourself SMART targets.
This method originates from project management.
SMART is the acronym for Specific, Measurable, Achievable, Reasonable, Time-bound.

Setzen Sie sich SMARTe Ziele. SMART steht für spezifisch, messbar, angemessen, realistisch und terminiert.

The goals in the area of sustainability should not be detached from the corporate goals.
Otherwise, conflicts of objectives can quickly arise.
Instead, it is a good idea to integrate your ESG goals into the overall strategy.
After the objectives, the headache continues – now it’s a question of what measures you want to use to achieve these objectives.
Involve your employees, but also other stakeholders and experts.
They are more likely to recognize solutions as they are more directly affected by the problems.
Be aware that not all measures can be implemented company-wide.
For some, it makes sense to implement them throughout the entire company.
However, other measures are more specific and are only suitable for a particular department.
You should formulate such measures directly with the employees concerned.

3. create an awareness of sustainability throughout the company

Sustainability is a company-wide team project.
All departments are needed, for example, to implement measures, define new targets and provide data for ESG reporting.
For this reason, it is also important to create a shared awareness of sustainability.
The best time to build this is when you are developing your sustainability strategy.
With a vision and mission for the sustainability area, you can give the topic the necessary importance.
These questions will help you to develop a meaningful statement that evokes emotions and motivates your employees:

What is our vision of the future?
What do we want to achieve as a company?
What future do we see for our company?
What values do we have as a company?

To give sustainability the importance it deserves in your company, you should not see it as a separate strategy.
Instead, integrate the topic into the overall strategy.
This will allow you to anchor the ambition to lead your company into a more sustainable future in all areas and processes of the company.
And very importantly: talk about your company’s ambitions.
Get everyone on board.
Communicate the vision and mission.
Explain what drives you and what you want to achieve.
This will create a shared awareness of sustainability.

4. it’s time for implementation: control is the be-all and end-all

The development of your sustainability strategy is complete – now it’s time to implement it.
You should see ESG management as a process.
It will take many years until you achieve your medium and long-term goals.
You need to take a long breath.
You will probably even have to adjust your measures and targets as new findings and developments (regulations, products, business models) emerge over time.
By constantly reviewing and measuring your measures using suitable KPIs, you can keep control of your progress and the entire process at all times.
Deviations from the target become apparent at an early stage and you can make adjustments.
A tool such as the VERSO ESG Hub is also ideally suited to this challenge and simplifies your sustainability management enormously.
Transparency is also an important factor during implementation in order to further increase awareness of sustainability among stakeholders and employees in particular.
Motivation is quickly diminished if you are only involved at the start but then hear nothing more about the topic.
It is therefore also important to talk openly about the results to date – both negative and positive.
This promotes trust and understanding, increases motivation and facilitates collaboration.

Develop a sustainability strategy: VERSO supports you!

VERSO supports you with expertise and software in the strategic implementation of sustainability in your company.
Our VERSO Sustainability Experts will accompany you throughout the entire process – from stocktaking and materiality analysis to sustainability management and reporting.
The VERSO ESG Hub offers you a comprehensive solution for holistic sustainability management.
And if you want to acquire further knowledge, you can attend training courses at the VERSO Academy.
This allows you to implement your sustainability strategy independently – but still receive reliable support.
Does that sound like what you’re looking for?
Feel free to contact us for more information.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

ESG-Ziele müssen auch von Führungs- und Kontrollorganen (Unernehmensführung, Vorstand, Aufsichtsrat) mitgetragen und erfüllt werden. Sonst drohen durch CSRD, LkSG, CSDDD und Co. empfindliche Strafen.

08.05.2024

ESG regulations oblige executives: What management boards, supervisory boards and management should do now

Read article

Der Aufbau der ESRS: SO berichten Sie CSRD-konform.

28.11.2024

ESRS report structure: How to report in compliance with CSRD

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Individual advice from the VERSO experts
Developed with expertise from 12+ years of sustainability management
Trusted by 250+ customers

Get to know the software!

Mann im Anzug mit Fahrrad – Symbolbild für Nachhaltigkeit im Unternehmen

23.04.2024

Why is sustainability important for companies? Facts & Figures 2024

Sustainability is becoming increasingly important – not only for private individuals, but also for companies. This article shows why you should not regard sustainability as a mere compulsory exercise.

5 facts why sustainability is important for companies

ESG issues (environmental, social and governance) are playing an increasingly important role in business. And rightly so: sustainability and sustainable action bring many advantages to a company – as various surveys show. Sustainability is therefore important because:

it ensures the continued existence of the company
it ensures economic success in the future,
it increases employee motivation,
it strengthens customer loyalty to the company
and because it creates new jobs.

ESG has developed into a topic that has become increasingly important for both private households and companies. For companies, sustainability is no longer just a label that can be marketed nicely. In addition to ethical aspects, it also brings major economic benefits – for example in the recruitment of employees, customer loyalty and, as a result, greater economic success. However, in order to implement sustainability efforts in a targeted manner, companies should not just implement loose measures, but rather develop a sustainability strategy – with concrete goals, measures and key figures for monitoring.

Sustainability ensures economic success

Sustainability is no longer limited to sorting waste in the office, but has a strong influence on many fundamental sectors of a company. Therefore, switching to sustainable business practices can of course be time-consuming and cost-intensive. But the effort is worth it, as these four studies show:

95% of respondents to the Ramboll’s 2019 Sustainability Survey stated that ESG is an important factor for long-term economic success. The reason: consumers are increasingly buying regional and ecologically valuable products.
45 % of the KPMG 2022 CEO Outlook executives surveyed (globally) stated that ESG measures improve their company’s financial performance.
67 % of the Sustainability Monitor 2024 companies surveyed recognize added value in CSRD for the further development of the company.
55 % of the KPMG 2024 U.S. CEO Outlook executives surveyed expect to see a significant ROI from their ESG initiatives in the next three to five years.

Infografik: Studien, wie sich Nachhaltigkeit auf den wirtschaftlichen Erfolg von Unternehmen auswirkt

Sustainability secures the future of companies

However, ESG commitment not only ensures that the company is in a good financial position. It is becoming increasingly clear that the climate crisis and its consequences are becoming a real threat to established business models and that business as usual is no longer sustainable. Conversely, this means that sustainable transformation ensures the long-term survival of companies.

55 % of the Capgemini of the German companies surveyed recognize that something has to change: they consider climate change to be the main cause of future disruptions to operations.
61% of the managers surveyed worldwide in the same study are of the opinion that a lack of sustainability strategy will become an existential risk in the long term.

Infografik: Studien, wie Nachhaltigkeit die Zukunft von Unternehmen sichert

Stronger customer loyalty through sustainable business practices

Satisfied customers are usually also loyal customers – as shown by a survey by Capgemini Study Sustainability in CPR 2020:

Three quarters of the companies surveyed from the consumer goods industry and retail sector stated that the inclusion of sustainability increases their customer loyalty.
79 % change their purchasing behavior in favor of more sustainability.
66% even select products and services specifically according to how sustainable they are.

This is in stark contrast to the 36% of large companies that were also surveyed in this study – and stated that sustainability does not play a major role for their customers. In the study, Deloitte examined The Sustainable Customer 2023study, Deloitte investigated what consumers want from companies when it comes to sustainability. The result: more transparency and honesty, among other things. 34% would trust a brand more if its ESG measures were verified by an independent third party – as the new Green Claims Directive aims to achieve.

Infografik: Studien, wie sich Nachhaltigkeit die Kundenbindung stärkt

Sustainability – the key to motivated employees

However, satisfaction must not only come from outside, but also from within. After all, motivated employees do more for their company. A company with a sustainable focus can provide precisely this additional motivation boost – and also give itself a real advantage in the search for talent:

67 % of the employees surveyed for the report Sustainability in CPR report stated that the integration of ESG issues in the company had increased employee motivation.
The EIB Climate Survey 2023 found that 56% of people surveyed value an employer that thinks (and acts!) sustainably.
For almost a fifth of the younger job seekers surveyed in this study, sustainability is even the criterion when choosing an employer.
And an HR survey by Gartner found that a strong ESG culture can increase employee engagement by up to 43%.

Infografik: Studien, wie sich Nachhaltigkeit Mitarbeitermotivation fördert und bei der Talentsuche unterstützt

Sustainability creates jobs

All of these factors play a role in economic success.
However, the benefits of a sustainable economy can also be seen in the economy as a whole.
According to a study by Deloitte, Germany will generate around 12 billion euros in additional gross value added per year by 2030, creating 177,000 new jobs in the process.
In addition to economic successes, 5.5 million tons of greenhouse gases will also be saved each year.

Infografik: 3 Fakten, welche Vorteile eine Nachhaltige Transformation der Wirtschaft bzw. eine Kreislaufwirtschaft für Deutschland bringt

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

Stakeholder-Anforderungen von ESG-Informationen an KMU

12.02.2024

5 reasons why a sustainability report is also worthwhile for SMEs

Read article

CO2-Bilanz, Klimaziele, Net-Zero: Hinter all diesen Begriffen steckt die Dekarbonisierungsstrategie bzw. die Klimastrategie von Unternehmen. Die ganzheitliche Erarbeitung einer solchen Strategie hat viele Vorteile. Welche Chancen dahinter stecken, lesen Sie hier.

08.04.2024

5 advantages of a decarbonization strategy: Why it is important for companies

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Best practices in the areas of ESG and sustainable supply chains
Developed with expertise from 12+ years of sustainability management
Sustainability events and much more.

Get to know the software!

Meeresschildkröte, die durch Plastikmüll schwimmt: Mit der neuen EU-Richtlinie gegen Greenwashing sollen solche Bilder seltener werden

26.03.2024

Green Claims Directive: EU takes action against greenwashing

While many companies are making efforts to become more sustainable by changing their business practices, there are unfortunately also some black sheep: companies that present themselves as sustainable in order to gain the associated benefits (e.g. customer trust or investor interest), but in reality do not keep their promises. To curb this, the EU Parliament has approved the Green Claims Directive.

Environmental information is often misleading

In January 2023, DIE ZEIT and The Guardian published an explosive story about the leading provider of CO2 certificates Verra.
According to the story, some of the carbon credits used by companies to offset their greenhouse gas emissions were not actually reducing carbon emissions.
Another study by the European Commission found that more than half of the environmental claims made by companies in the EU were vague or misleading, with a whopping 40% of claims being completely unsubstantiated.
And green labels are also misleading consumers: half of all green labels offer weak or non-existent verification.

The EU’s response: the Green Claims Directive

To combat these practices, the EU Commission published a draft of the Green Claims Directive on March 22, 2023.
Almost exactly one year later, on March 13, 2024, the European Parliament voted in favor of the Green Claims Directive with 467 votes in favor, 65 against and 74 abstentions.
The dossier will be pursued by the new Parliament after the European elections in June.
The directive is part of the Circular Economy Action Plan, which also includes, for example, the recently adopted right to repair.
The objectives of the new regulation:

Green statements throughout the EU should be reliable, comparable and verifiable;
Consumers should be protected from greenwashing;
The directive is intended to contribute to a circular and green EU economy by enabling consumers to make informed purchasing decisions;
The aim is to create a level playing field with regard to the environmental performance of products.

Which environmental claims are affected by the Green Claims Directive?

The Green Claims Directive deals with statements in the context of
communication that indicate that a product or a company is

has a positive or no impact on the environment,
is less harmful to the environment than other products or companies or
that its effect has improved over time.

Experience has shown that environmental claims such as “green“, “climate-neutral” or “100% CO2-compensated” are often misleading and can easily mislead consumers.
The EU wants to create more transparency with explicit regulations for climate-related claims, especially when it comes to CO2 offsetting projects and methods.

Will “green claims” be banned?

Companies are still encouraged to communicate about their sustainability activities or the sustainability of their products.
Nevertheless, there are restrictions on how and what can be communicated.
For example, it is important for sustainability labels to be based on a certification system, and general environmental claims are prohibited if there is no evidence of performance.
Environmental claims may also not be made for an entire product if they only relate to one aspect.
You can find out which environmental claims companies need to pay particular attention to in the white paper on the Green Claims Directive.

What are the consequences of the Anti-Greenwashing Directive for companies?

The directive now requires companies to provide evidence of their environmental claims, have them independently audited and then communicate them transparently.
Those who do not comply with the directive can expect hefty fines and exclusion from public tenders.
We have explained the specifics of the verification process, the differences to other laws and the possible consequences of non-compliance in detail in our white paper.

What does the directive achieve against greenwashing?

With the introduction of the new set of rules against greenwashing, consumers will once again be able to rely more on information in sustainability reports, on websites and on product packaging.
The growing number of private eco-labels will be restricted if the label is awarded on the basis of unsubstantiated claims.
This way, consumers will no longer have to wade through a jungle of eco-labels.
Restricting greenwashing also means that competition will be fairer.
Companies that really want to make a difference will get more attention and an advantage on the market.
And, of course, our planet will benefit if companies actually drive forward the sustainable transformation.

We support you with your sustainability communication

VERSO supports the EU project to curb greenwashing.
In this context, we also advise you and your company on sustainability communication.
Our sustainability consultants will help you to publish meaningful information while remaining truthful – whether as part of a sustainability report or other internal and external forms of communication.

Please write to us. We can help you.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

Holzwürfel, die ein Diagramm mit steigendem Pfeil abbilden: Richtig gemacht, können Nachhaltigkeitesberichte zur Steigerung des Unternehmenserfolgs beitragen Rising bar chart made of wooden blocks symbolizing measurable progress and continuous improvement in a sustainability report.

19.11.2024

Sustainability Report: What Is It and What Do You Need to Know?

Read article

09.10.2023

The five biggest greenwashing traps and how to avoid them

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Best practices in the areas of ESG and sustainable supply chains
Developed with expertise from 12+ years of sustainability management
Sustainability events and much more.

Get to know the software!

Eine Nachhaltigkeitsstrategie ist für Unternehmen wichtig, um ihre ESG-Ziele zu erreichen

11.03.2024

5 reasons why a sustainability strategy is important for companies

A corporate strategy is a matter of course for many companies. It serves to manage the most important opportunities and risks in relation to the business model. The sustainability strategy is an extension, so to speak, with a focus on ESG issues. It is necessary in order to position your company for the future. In this blog post, we explain the specific benefits of a sustainability strategy.

To get started: What does a sustainability strategy say?

A sustainability strategy is the roadmap for the sustainable transformation of your company.
It defines how you deal with relevant ESG issues – in other words, a plan for the key aspects in the areas of environmental, social and governance.

However, the strategy not only relates to your company itself, but also to environmental and social impacts within the supply chain or even across the entire value chain.
The roadmap contains

key opportunities and fields of action,
medium and long-term goals that your company has set itself, and
above all, an implementation plan with effective measures.

You can identify the most important areas for action with the help of a materiality analysis.
The EU CSRD Directive with its European reporting standards ESRS requires an analysis based on double materiality. In doing so, you identify relevant topics for your company – from two perspectives: how do sustainability aspects influence your company and how does your company affect the environment and society. If you involve your stakeholders in the process, you will gain valuable input and create greater acceptance in advance for subsequent decisions.

The double materiality analysis helps you to focus on the key issues with the greatest leverage and not get bogged down in the minutiae. You define suitable goals and effective measures for the relevant fields of action. Measurable KPIs also ensure that your progress is monitored.
You should take a scientifically sound approach when developing your goals.

This means, for example, that you should base your climate targets on the GHG Protocol (Greenhouse Gas Protocol) and the 1.5 degree target.

Sustainability strategy: 5 advantages for companies

The importance of a sustainability strategy is shown by the results of the Bertelsmann Stiftung’s Sustainability Transformation Monitor 2024. In the study, around 54% of companies stated that sustainability is part of their general corporate strategy. Around 26 percent have a separate sustainability strategy. But let’s now look at the specific benefits:

1. effective risk management and greater resilience

We are in a time of change. Climate protection, digitalization, new work, diversity and new technologies such as artificial intelligence are just a few of the current megatrends.
The future is coming in leaps and bounds and will bring numerous changes with it.
A sustainability strategy ensures that you are aware of potential environmental and social risks for your company.

This is where risk management comes into play, which is part of the double materiality analysis mentioned above. Many companies already have a risk management system – but this usually only includes a small proportion of ESG issues, which are also only assessed from a financial perspective.

This is now being supplemented by a holistic ESG perspective and, in contrast to the established system, opportunities are also given greater weight. You identify and assess potential risks, draw up a plan to avoid or reduce risks and monitor your measures as part of ESG management. This allows you to react more agilely and flexibly to issues such as climate change, political developments, fair working conditions or resource scarcity.

You also have the opportunity to proactively minimize risks and their impact. You should not only think about risks that directly affect your company, but also about the entire value chain.
Effective risk management therefore contributes to cost savings and protection against unexpected losses. This goes hand in hand with greater resilience and future viability of your company.

It also pays to be able to demonstrate risk management with a view to ESG issues and a sustainability strategy when granting loans. Banks regularly ask for both as part of their lending decisions – you can find more information on this in our blog post“ESG in financing: this data decides on loans”.

2. efficient use of resources and employees

Based on risk and opportunity management, you can improve the use of resources in your company. Sustainability management promotes the optimization of processes and the development of new technologies and innovations. This can result in the careful handling and more efficient use of resources.

Examples: More efficient machines reduce energy consumption; recycling production waste reduces the need for raw materials. Regardless of whether the end result is a reduction in waste or energy consumption or whether resources are used more efficiently – good ESG management can save you money. Another point that speaks for a higher sustainability of your company.

However, you can not only optimize the use of resources, but also improve your time management and that of your colleagues. By focusing on the key issues, you have more time to drive these tasks forward.

3. holistic orientation and long-term planning

If you only introduce individual, unrelated measures, you often fail to see the big picture.
A sustainability strategy provides a remedy here and ensures a holistic view. This means that no separate initiatives are launched, but each individual measure is an essential part of an overarching strategy.

You identify the most important topics with the double materiality analysis mentioned above.
They are then incorporated into your sustainability strategy, which enables long-term planning as well as systematic work and communication. You can view your progress in CSRD-compliant software, such as our ESG Hub, where you can collect and monitor all data. In the best case scenario, the sustainability strategy does not stand alone, but is integrated into the corporate strategy. This allows you to emphasize the central importance of sustainability. In addition, management is actively involved in the topic.

4. meet the requirements of standards such as ESRS

Many companies will also urgently need to develop an ESG strategy in the future as part of CSRD reporting – and in contrast to most existing frameworks, this will be much more intensive. The European ESRS standards explicitly require a sustainability strategy for all material topics. The German Sustainability Code (DNK) also addresses the sustainability strategy in its Criterion 1 – but nowhere near as in-depth as the ESRS.

The DNK requires companies to state whether they are strategically addressing the issue of sustainability or whether only individual measures have been implemented to date.

The GRI standards of the Global Reporting Initiative do not directly ask for a strategy.
However, some sections deal with the deeper anchoring of sustainability in the company.

The sustainability strategy also provides a lot of information that is needed when preparing a sustainability report.

5. targeted communication of ESG issues

You have drawn up your sustainability strategy. The first measures are underway and you can even see the first signs of progress. Then you should also talk about it – for example in a sustainability report. Read our blog posts to find out how to communicate sustainability on your own website and avoid the five biggest greenwashing traps.

As with the implementation of measures, the sustainability strategy ensures that you keep an eye on the big picture. You focus on key topics with an impact that are also related to your core business. The purchase of a single electric car in a vehicle fleet with hundreds of diesel cars will probably attract more criticism than praise. As your communicated topics are placed in a larger context by the overarching strategy, they also carry more weight. You present a consistent image to the outside world, increase your reputation and brand value, attract talent on the job market and retain or acquire customers.

Conclusion: A sustainability strategy is worthwhile for companies

ESG issues are often already part of a company’s strategy and risk management without being explicitly named. A sustainability strategy now focuses on these areas of action. It expands the existing strategy to include a holistic ESG perspective and also highlights opportunities. The aim here is to position the company for the future and therefore to address relevant risks and opportunities or the greatest impact in a holistic manner. A sustainability strategy is therefore definitely worthwhile. Not only because it is required as part of CSRD reporting. Your company can also use it to achieve and maintain competitive advantages.

With your ESG management, you can differentiate yourself from your competitors and increase your chances of winning tenders and loans, for example, where sustainability data is also requested. You also improve your image, which leads to greater customer loyalty and attracts young applicants who also choose their future employer based on social and environmental aspects.

Do you and your company want to benefit from the advantages of a sustainability strategy?
VERSO Sustainability Consultants will provide you with pragmatic and effective support in designing a roadmap for the sustainable transformation of your company. Together, we will put your company on the path to a more sustainable future – from strategy to implementation.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

Bankgebäude in Frankfurt: Zukünftig fließt das ESG-Commitment in Kreditentscheidungen ein

03.11.2023

ESG in financing: This data decides on loans

Read article

19.11.2024

Sustainability Report: What Is It and What Do You Need to Know?

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Individual advice from the VERSO experts
Developed with expertise from 12+ years of sustainability management
Trusted by 250+ customers

Get to know the software!

12.02.2024

5 reasons why a sustainability report is also worthwhile for SMEs

Many companies – large and small – are affected by sustainability regulations such as the CSRD, the LkSG or the upcoming European supply chain law CSDDD. But what about those that are not subject to these regulations? Are they exempt from reporting?

Watch out: Not being directly affected does not mean that you do not have to deal with sustainability! We explain here why SMEs also have to provide sustainability data and what information is required.

Which stakeholders request ESG data from SMEs

1. business partners create transparency in the supply chain

Are you a supplier to another company? Many SMEs supply larger companies that fall under the LkSG (Lieferkettensorgfaltspflichtengesetz) and are or will be affected by the EU CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive).

Large companies not only have to make their own ESG information transparent, but also that of their suppliers.

This means that you are also affected by the requirements of the regulations and will be asked by your customers for comprehensive sustainability information.

As a result, you have to undergo extensive due diligence checks, such as the EcoVadis sustainability assessment, which identifies potential risks for people and the environment in the supply chain.

Incidentally, it is not only you as a supplier who must provide evidence, but often also sub-suppliers.

Your customers are also bound by industry-specific guidelines and laws.
Sustainability information from the supply chain is also required from this side.
Examples of this include the Agricultural Organizations and Supply Chain Act (AgrarOLkG), the chemical industry standard or the industry-specific guidelines of the OEC.

2. financial sector pays more attention to sustainable investments

SMEs that are supported by investors or have received project-related investments should definitely be prepared for ESG inquiries.
The reasons for this:

Due to the SFDR (Sustainable Finance Disclosure Regulation), financial market players and financial advisors are obliged to provide ESG information on financial products and services.
Investors are themselves capital market participants and must report on sustainability goals and positioning within the financial sector.
Rating agencies now also include ESG criteria in their investment ratings.
Prior to the final M&A transaction, the sustainability strategy is reviewed – if not already requested in advance, measurable sustainability indicators are required from you by then at the latest.

3. banks require ESG disclosures in loan and funding procedures

If you want to apply for a loan or a grant from the bank, you will need a number of documents.
In the past, it was mainly about creditworthiness, business concept, collateral and the like.
Today, the issue of sustainability also plays a decisive role.

This is because banks need sustainability information from you when granting loans in order to meet the requirements of the European Banking Authority (EBA) and the German Federal Financial Supervisory Authority (BaFin).

In addition, banks are increasingly adhering to self-imposed frameworks and sustainable finance targets.

In practice, this means that lending costs are directly influenced by your ESG rating: better rating, cheaper loan.

4. insurance companies also include ESG risks in their financial statements

Insurance companies also rely on and request ESG data from customers. Two perspectives need to be understood here: Firstly, (re)insurers also fall under the CSRD reporting obligation.

They must therefore report on the status quo of their sustainability ambitions themselves.
This also includes the customer area, for which your insurer naturally needs information from you as a customer.

The second perspective is about the insurance risk when you want to take out a new insurance policy.

It is common practice here to first assess the risk potential of an insured person. Sustainability risks are now also taken into account. Anyone who does not have this issue on their radar may be classified as having a higher insurance risk and lower insurance benefits.

5. customers and partners expect proof of ESG efforts

New partnerships, collaborations and tenders are increasingly demanding certifications that prove a company’s sustainability ambitions.

When you enter into negotiations, you need to be well prepared:

No Open Doors without ESG certifications: In addition to known information security standards, for example, certifications from the ESG sector are increasingly a prerequisite for a serious discussion.
Go through the assessments at an early stage – they are often lengthy and cannot be “handed in quickly”.
Sustainability and ESG criteria in the tendering process: If there is a tender, your company could fall out of the selection process due to a missing or unsound sustainability strategy.
You can prove this with recognized ESG certificates, among other things.
With sustainability and ESG criteria in tendering processes, companies want to ensure that ecological and social standards are adhered to in the supply chain right from the start.

In addition to special ESG certifications, ESG criteria are also asked for in other quality standards that have a high priority in the industry and are actually “only” concerned with corporate processes:

Fairtrade
Organic certifications
Employer rankings
ISO standards
…

How do SMEs best prepare for sustainability requirements from stakeholders?

As you can see, sustainability issues come from every corner. You not only have to collect and communicate ESG data to fulfill legal requirements – keyword: LkSG, CSDDD and CSRD-compliant.

Your stakeholders also ask for this data for a variety of reasons. The problem with these queries is that if SMEs are affected by one or more of these scenarios and are not prepared for them, this usually means a lot of work. This is because very different information is required from different stakeholders. They are confronted with different reporting standards and find themselves in a flood of questionnaires.

However, you can avoid these problems with a voluntary sustainability report.
It is best to report in accordance with a recognized standard that is suitable for your company, such as the DNK, the GRI Standards or the ESRS – the latter will enable you to meet the regulatory requirements of the CSRD in the future. Frameworks such as the SDGs or the UN Global Compact also form a good basis for the sustainability report.

EFRAG is currently also working on its own voluntary standards(VSME) for SMEs, which are adapted to the size, resources and needs of these companies.
The advantages of a voluntary report in a nutshell:

As a rule, you already collect all the important data that you also need for other purposes.
In the best case even in a single tool, in which you can also control measures and write the report.
In the case of inquiries, the report already contains most of the required information, giving you more time for detailed questions.
If you do have to report later, you are already optimally prepared for CSRD, LkSG and CSDDD!
Although this may sound like a lot of effort at first, the introduction of ESG structures brings with it great opportunities: innovation and long-term growth are promoted, risks are minimized and, not to forget, you also consolidate and strengthen relationships with your customers.

Do you want to be prepared for the next request?

The voluntary sustainability report puts you ahead of the game!
If you have any questions about the sustainability report or the legal requirements, we are here for you – with over 12 years of experience in sustainability management.

Please contact us. We can help you.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This could also be of interest to you:

Sustainability Report of the German Press Agency (dpa)

Read story

19.11.2024

Sustainability Report: What Is It and What Do You Need to Know?

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Individual advice from the VERSO experts
Developed with expertise from 12+ years of sustainability management
Trusted by 250+ customers

Get to know the software!

CSR, ESG oder Nachhaltigkeit: Wo liegen die Unterschiede? © yunus susanto, Getty Images via canva.com

29.01.2024

CSR, ESG, Sustainability – What’s the Difference?

CSR, ESG, sustainability: What may seem like the same thing at first glance actually differs. In this post, we clarify the difference between the terms “ESG,” “CSR,” and “Sustainability”!

In this article, we’re comparing apples to pears that, at first glance, all seem like apples – because it’s about the very similar terms “CSR,” “ESG,” and “Sustainability.” You’ll read what these terms actually mean and how they differ.

What does CSR mean?

You can think of “CSR” as a kind of moral and ethical foundation for a company’s sustainability strategy. CSR stands for “Corporate Social Responsibility.” And although the word “Social” is included, it doesn’t only refer to the social aspect of sustainability. CSR also encompasses environmental and governance issues. You may have come across the abbreviation “CR” – which stands for “Corporate Responsibility” and intentionally excludes “Social” to avoid confusion. CSR or CR is essentially the predecessor to ESG. Or, to put it with an English saying: CSR walked so that ESG could run. The EU Commission defined CSR as follows back in 2011:

“[A] concept that serves as a basis for companies to integrate social and environmental concerns into their business activities and their interactions with stakeholders on a voluntary basis.”

If we look at it closely, CSR primarily refers to a company’s awareness of the impact it has – whether actively or passively – on society or the environment. In terms of CSR, companies address their responsibility by taking qualitative actions that go beyond the legal minimum (e.g. CSRD, LkSG).

What does ESG mean?

“ESG” stands for “Environmental, Social, Governance.” Unlike CSR, ESG is a more pragmatic, detail-oriented approach to sustainability efforts. The term encompasses the impact of corporate strategies and practices on these three areas:

Environmental: Environmental criteria such as energy consumption, climate strategy, or resource management.
Social: Criteria related to stakeholders (beyond investors), such as working conditions along the supply chain, diversity, or the gender pay gap.
Governance: Criteria for ethical corporate governance, such as anti-corruption measures, whistleblower protection, or supplier selection.

ESG is quantitatively oriented. For example, the ESRS, the framework for sustainability reporting under the CSRD, predominantly requires clear key figures.

At the core of ESG is the so-called “triple bottom line,” also known as the “3-pillar model of sustainability.” This approach posits that sustainable development is only possible when environmental, social, and economic sustainability goals are pursued equally.

And what is sustainability?

Let’s now address the final point in our distinction between ESG, CSR, and sustainability.

Sustainability, or “Sustainability” in English, is essentially an umbrella term for ESG and CSR. Without CSR and ESG, sustainability cannot exist.

Let’s take a brief journey to the Ore Mountains in the early 18th century. In the mining region, wood was such an important resource for fuel, construction, and ore smelting that it became increasingly scarce. Hans Carl von Carlowitz, who was, among other things, the head of the Upper Mining Office in Freiberg and responsible for timber supply, first formulated the definition of sustainability, stating that only as many trees should be cut from the forest as could grow back. By the 19th century, this definition became established in other areas as well.

Zooming out to the big picture, sustainability means that systems—regardless of their type—can only be stressed to the extent that they can withstand without damage. Resource usage should only occur within these limits.

Today, in 2024, we are all more aware than ever: Most of our systems have already reached their limits or are being used far beyond their capacities. Whether it’s overfishing or deforestation, mining rare earths or oil extraction, air pollution or human exploitation, we need to strengthen the concept of sustainability and act now to create a livable future for future generations.

Companies play the key role in sustainability, as enablers of consumer needs, facilitators of familiar conveniences and living standards. By becoming aware of their responsibility (CSR) and adjusting their business strategies and supply chains (ESG), they hold the key to sustainable transformation.

Conclusion: Is ESG or CSR more important?

To answer the often-asked question of whether ESG or CSR is more important: Both complement each other. However, ESG has today become the more common term for a comprehensive sustainability strategy.

CSR represents the fundamental idea necessary for the sustainable transformation of the economy: the awareness that companies bear responsibility and must act accordingly. ESG, on the other hand, provides the framework for targeted action. Thus, measurable and effective actions are derived from a sense of responsibility.

* This information is summarized editorial content and should not be considered legal advice. VERSO assumes no liability.

This might also interest you:

23.04.2024

Why is sustainability important for companies?

Read article

Nachhaltigkeit auf der Website kommunizieren

18.12.2023

Communicating sustainability on the website

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Individual advice from the VERSO experts
Developed with expertise from 12+ years of sustainability management
Trusted by 250+ customers

18.12.2023

How to communicate your sustainability on the website

Your company is sustainable – but do potential customers know that? In this article, you will find 6 tips for communicating your sustainability measures credibly on your website.

More and more consumers are specifically choosing companies based on sustainability aspects – and more and more companies have to pay close attention to ensuring that everything is above board in their supply chain since the LkSG came into force.

Sustainability is increasingly becoming an important criterion when making purchasing and partnership decisions. And what better way than your own website to inform potential customers and partners about your sustainability efforts? So it’s high time to put your company’s sustainability efforts in the spotlight.

But what’s the best way to do this?

6 tips for communicating sustainability credibly on the website

Tip 1: Transparency and measurable data

Facts, facts, facts: Solid figures are still the most credible. That’s why our first tip is to provide a detailed sustainability report on your website – e.g. as a separate page or as a downloadable PDF document. The report shows existing measures, but also describes what your company will implement in the future. In addition, show prominently and separately to the report what goals you have set yourself and what measures you intend to take to achieve them. Also state openly where there is still a need for action. From 2024, the CSRD will require around 15,000 companies to publish a sustainability report anyway. However, a voluntary report is also a good thing for all companies that want to clearly show: “We take sustainability seriously!”

Tip 2: Awards from independent bodies

Has your company been certified for sustainability measures? Then be sure to place the relevant seals and certificates on your website! External confirmation of your sustainability efforts increases credibility enormously. Important here:

Don’t hide your awards in a small section on a subpage that isn’t even linked in the menu.
Whether as a banner on the homepage or as a separate menu item: If you do good, it’s okay to show it!
Look for awards from recognized, independent bodies.
Certificates and seals that any company can simply buy with enough money harbor the risk of greenwashing.

Speaking of greenwashing: you can find out how to avoid the most common stumbling blocks in the article “The five biggest greenwashing traps and how to avoid them”.

Tip 3: Present cooperations

Where do you source your raw materials or goods? Which companies do you work with – and how sustainable are they? Do you cooperate with environmental, animal welfare or human rights organizations with which your company creates impact beyond its own backyard? What projects is your company involved in? These are all interesting points that you should definitely not sweep under the carpet! Show how you are getting involved and actively shaping the change towards sustainability through your responsibility. But be careful not to fall into any greenwashing traps here either.

Tip 4: Show commitment

Was the fact that you planted a flowering meadow next to the company headquarters in 2020 the latest news in terms of sustainability? Hopefully not! If you really want to communicate your company’s sustainability credibly, you should plan for the long term – ideally on the basis of a holistic sustainability strategy. In any case, describe what your company has already achieved. List how sustainability is currently practiced. For example, through a healthy working environment for your employees or fair pay in your own supply chain. After all, sustainability is not just about the environment. But also show what you are planning for the future. Present long-term sustainability goals with clear milestones on your website. Make sustainability an integral part of your company’s purpose statement. Share progress reports. Continuity and commitment are still the best way to show that sustainability was more than just a short-term marketing measure for you.

Tip 5: Be honest

Honesty lasts the longest. This also applies to sustainability communication. No company is 100% sustainable – so don’t try to pull sustainability measures out of the air. Present your previous measures and successes, but also admit openly and honestly where there may still be a problem. This will not make you look bad – on the contrary! It shows that your company is seriously thinking about sustainability.

Tip 6: Demonstrate sustainability with a sustainable website

Last but not least, a point that is easy to forget at first glance: if you want to emphasize the sustainability of your company, you should definitely take a close look at your website! Tools such as the Website Carbon Calculator will calculate the CO2 footprint of your website in no time at all.

Is your website more of a global average? Then look out for specialists in green web design to exploit the full sustainability potential of your site.

Until then, some simple tips like these will help you to make your website more sustainable without any design or coding knowledge:

Reduce file sizes (images and videos).
Check whether your site is powered by coal – you can do this very quickly using the Green Web Foundation tool, for example. If not, switch to a web hosting provider with transparently traceable green electricity.
Design your website to be barrier-free in order to also do justice to social sustainability – a first step here would be descriptive texts for images, for example.
Take the plunge and declutter so that outdated content and superfluous tools don’t continue to waste energy for no reason.

We wish you every success – and are happy to help if you need support with your sustainability communication!

Holistic sustainability consulting

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

23.04.2024

Why is sustainability important for companies?

Read article

26.03.2024

Green Claims Directive: EU takes action against greenwashing

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Individual advice from the VERSO experts
Developed with expertise from 12+ years of sustainability management
Trusted by 250+ customers

Get to know the software!

03.11.2023

ESG in financing: This data decides on loans

“Your loan application has been rejected.” Some companies may hear this or similar sentences more often in the future. The reason: they were unable to provide the ESG data requested by the bank or meet the requirements. After all, sustainability is also becoming increasingly important in the financial sector. Read this article to find out how ESG data affects financing and what data companies need to provide now to ensure their loan applications continue to be approved.

How to take a closer look at financing applications

Sufficient equity, high cash flow, a secure market position and a solid corporate strategy – if a company could demonstrate this when applying for financing, the loan was as good as secure.
This is now a thing of the past.
This is because ESG criteria are now also included in the credit decision.
But how does this come about?
Let’s take a quick deep dive to answer this question.
If you are not so familiar with financial topics: Don’t worry – even though we’ll be taking a close look at all the important points, we’ll stay in the non-swimmer’s area.

Green Deal, Climate Protection Act, SFDR, MaRisk: many requirements – one goal

The background to this new development is a large number of requirements as part of the EU’s sustainability strategy.
Let’s work our way from the outside in.
With the European Green Deal, the member states of the EU have committed themselves to the sustainable transformation of society, the economy and industry.
The EU wants to become climate-neutral by 2050.
At the same time, Germany has set itself the target of becoming greenhouse gas neutral by 2045 with its new Climate Protection Act .
Europe is playing a pioneering role internationally with this plan.
The task now is to put the Green Deal into practice and find ways to get the sustainable transformation moving.
And probably the most powerful lever for tangible change in the economy is – precisely – money.
If you want to drive sustainability forward, you have to redirect financial flows.

Sustainable Finance Disclosure Regulation

With the Sustainable Finance Disclosure Regulation(SFDR), the EU introduced a measure in 2019 that obliges financial market participants such as banks and credit institutions to be more sustainable.
The SFDR’s approach: banks must make the sustainability and ESG aspects of their financial products transparent.
How do ESG criteria affect the products?
And conversely, how does financial trading affect the environment and society?
The 7th MaRisk amendment obliges banks, among other things, to take ESG aspects and risks into account when making and monitoring lending decisions.
Similar to what insurance providers have been doing for years, banks and credit institutions will therefore check, for example, which industry a company belongs to, how high its emissions are or what the situation is regarding equal rights.
According to the study “Consideration of ESG criteria in the credit process for corporate customers” (2023), only 38% of the banks surveyed take ESG risks into account.
However, the consequences of this development are already being felt.
For example, banks and funds already rejected STEAG’s application in 2021 – partly because the electricity producer operates several coal-fired power plants and is pursuing an uncertain coal phase-out strategy.

No financing without an ESG check: banks want to see this data now

In addition to the general CSR reporting obligation, there are therefore further obligations – at least for companies that require financing.
But what specific sustainability information is now required?
The Association of German Banks has put together an initial list of questions that compiles sustainability KPIs.
The basic ESG KPI catalog is based on the CSRD, the EU taxonomy and various reporting standards such as GRI.
In addition to general information on the company, you will find questions on the following ESG aspects in this overview:

Environmental and transitory risks – e.g: What proportion of your company’s business activities have a negative impact on biodiversity or the ecosystem?
Physical risks – e.g: What measures has your company taken or planned to reduce physical risks?
Social – e.g.: Does your company have an anti-discrimination policy?
Governance – e.g.: Is the remuneration of the management level in your company (also) linked to the fulfillment of sustainability targets?

The banking association admits that this catalog is not complete and is not binding for banks.
For companies, this means: collect your ESG data in a structured way and keep an overview.
This will make it easier for you to quickly provide your bank with all the ESG data it needs when applying for financing.
VERSO supports you in this – with software, services and training.

ESG data management with VERSO

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

Ältere Frau arbeitet am Laptop und guckt sehr konzentriert

15.05.2024

The cost of mistakes in reporting and implementing sustainability

Read article

11.03.2024

5 reasons why a sustainability strategy is important for companies

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Best practices in the areas of ESG and sustainable supply chains
Developed with expertise from 12+ years of sustainability management
Sustainability events and much more.

Get to know the software!

09.10.2023

The five biggest greenwashing traps and how to avoid them

100% sustainable, climate-neutral or bio-plastic – what it says on a product doesn’t always have to be true. There are countless examples of greenwashing that we have all heard of. Greenwashing often happens unknowingly. The list of stumbling blocks is long. Find out what they are and how to avoid them in this article about the five most common pitfalls.

1. confusing data situation and opaque sustainability reports

Data is the basis for a meaningful sustainability report.
This allows you to document and underline your sustainability ambitions.
It is important that it is accurate, complete and audit-proof.
This is because sustainability reports must be checked by an external auditor as part of the CSRD.
It is best to maintain your data clearly in a specialized tool; we have developed the VERSO ESG Hub especially for this purpose.
This makes it easier for you,

check the data for accuracy,
interpret the key figures correctly,
quickly recognize the actual status quo and
keep track of the development of your company.

This prepares you for active communication free of greenwashing and enables you to answer critical questions confidently and based on data.

2. scope 1, 2, 3 – all included?

When you create a carbon footprint, it is already a major challenge to gather all the relevant data from your own company.
However, it can be even more challenging if you need climate data from other companies for the_{CO2 footprint}.
This is because not only the emissions that a company itself emits have to be taken into account, but also those in the value chain!
Many companies “only” record the emissions in Scope 1 and 2 in their first carbon footprint.
2. This includes, for example, direct emissions from fossil fuels such as gas and heating oil or the company’s own vehicle fleet (Scope 1) and indirect emissions from the generation of purchased electricity, steam, heat and cooling (Scope 2).
However, to make a statement about your actual greenhouse gas emissions, you also need the information from Scope 3.
3, which includes all upstream and downstream emissions along your company’s value chain (purchased goods or raw materials, business trips and transportation).

Did you know that the majority of CO2 emissions come from Scope 3?

Recording Scope 3 is much more laborious than just Scope 1 and 2, as you need a lot of data from other companies.
Nevertheless, you should include this area in your reporting as soon as possible.
It helps to engage in dialog with stakeholders and get digital help.
The VERSO Supply Chain Hub gives you an overview of the emissions in your supply chain.
In this way, you avoid the risk of making false statements about your sustainability due to a lack of data.

3. don’t exaggerate, stick to the facts!

A careless word is quickly uttered, the data is no longer fully remembered or superlatives and exaggerated statements are added in all the euphoria.
Many greenwashing accusations have their origins in marketing activities that portray the company in too good a light.
Be careful what you put out there!
Four tips on how to create credible and accurate content:

4. cherry-picking makes you look untrustworthy

Precisely because there are so many examples of greenwashing, stakeholders are scrutinizing a company’s sustainability statements more and more closely.
Companies must communicate transparently so that stakeholders consider their communication on the topic to be credible and effective.
We advise against “cherry picking”, i.e. communicating a few positive results or activities!
A small positive initiative quickly becomes unnaturally inflated.
Holistic approach is the keyword here: talk about the need for action that your organization still has, share your ambitions and goals, communicate the challenges that you still have to overcome as a company.
This will show that your company is not treating sustainability as a one-off project, but is striving for serious and holistically effective changes.

5. activities lack reference to the company or product

The activities you communicate about must be appropriate to your company, its products and its size.
Buying your first e-car out of a fleet of 500 diesel vehicles is more likely to attract criticism than applause.
However, if your activities fit into the corporate context, the seriousness of your ambitions will be comprehensible to external stakeholders.
And: your employees will also identify with it and be enthusiastic about getting involved.
A materiality analysis is helpful here: this allows you to identify the areas in which the company has a high negative or positive impact on the environment and society or which could be relevant from a financial perspective.
The findings can then be used to tackle the issues that really make a difference.

Tips for greenwashing phrases that you should avoid:

There are certain phrases that you know as soon as you read them: There is little or nothing behind them.
The EU Commission and the European Council list a number of such expressions in their proposal for the Green Claims Directive.
Here is a summarized list of greenwashing phrases that you should avoid in your communication:

Afraid of greenwashing? No “green silence” please!

You should no longer be afraid of greenwashing.
What we are observing: Because companies see how easily sustainability communication can become greenwashing and how much this can damage the company, they don’t talk about their activities in the first place.
A domino effect: if no company communicates about sustainability, everyone thinks that the others are doing nothing and therefore does less themselves than they actually could.
This spiral of silence slows down the sustainable transformation of companies and therefore the entire economy.

With this overview, we want to achieve the opposite: We hope to have encouraged you to communicate transparently and effectively about your sustainability strategy and activities.

Avoid greenwashing? VERSO supports you!

If you need support in communicating and preparing your sustainability report, we will be happy to help you: With our ESG software, you can collect all relevant data and report in compliance with CSRD.
We are also on hand to advise you on your journey to sustainable transformation.
At the VERSO Academy, you can also train to become a CSR specialist.

Please write to us. We can help you.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

15.05.2024

The cost of mistakes in reporting and implementing sustainability

Read article

19.11.2024

Sustainability Report: What Is It and What Do You Need to Know?

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Best practices in the areas of ESG and sustainable supply chains
Developed with expertise from 12+ years of sustainability management
Sustainability events and much more.

Get to know the software!

EU-Flaggen: Die EU hat zur Umsetzung des Green Deal drei wichtige Richtlinien in Kraft gesetzt

21.08.2023

The EU ESG guidelines and how they relate to each other

The European Union’s Green Deal

With its Green Deal, the European Union wants to make the EU climate-neutral by 2050 and channel financial flows into sustainable projects and companies.
The extensive program also includes three important ESG guidelines and regulations for sustainability reporting:

EU taxonomy,
Corporate Sustainability Reporting Directive (CSRD) and
Sustainable Finance Disclosure Regulation (SFDR).

But how are they connected and why are all three important for companies?

EU taxonomy, CSRD and SFDR briefly explained

Before we take a closer look at the relationship between the EU taxonomy, CSRD and SFDR, we will first look at the three EU requirements individually.
The European Union adopted the EU Green Deal back in 2019.
The program provides for extensive measures that penetrate deep into the economy and industry.
This also includes the three directives.

EU taxonomy

The EU taxonomy came into force on January 1, 2022 and defines which economic activities can be classified as sustainable.
The regulation sets out criteria for climate and environmentally friendly activities and products.
Accordingly, an economic activity must

make a substantial contribution to at least one of the six environmental goals,
do not compromise one or more of the other environmental objectives, and
in compliance with the minimum protection (OECD Guidelines).

Further information can be found in our factsheet on the EU taxonomy.

Factsheet: EU taxonomy

CSRD

While the EU taxonomy focuses on activities and products, the Corporate Sustainability Reporting Directive focuses on the company level.
The CSRD will be introduced in stages from 2024 and regulates sustainability reporting by companies.
Ultimately, around 15,000 companies in Germany and around 50,000 in the EU will be affected by the directive.
The CSRD creates a uniform framework for the disclosure of ESG (environmental, social and governance) data.
In this context, there is a binding reporting standard in the European Union for the first time: the European Sustainability Reporting Standards (ESRS).
Further information can be found in our factsheet on the CSRD.

Factsheet: CSRD

SFDR

The Sustainable Finance Disclosure Regulation came into force on March 10, 2021.
It obliges financial market participants such as private equity, venture capital and fund companies as well as financial advisors to disclose sustainability information on their products and portfolios.
The increased transparency is intended to ensure that environmental and social factors are given greater consideration when making investment and financing decisions.
A commitment to “sustainable finance”, so to speak.
Further information can be found in our factsheet on the SFDR.

Factsheet: SFDR

The relationship between the EU taxonomy, CSRD and SFDR

Transparency is crucial to channeling more money into sustainable projects and companies.
Customers, employees, investors and many other individuals and groups demand detailed information on environmental, social and governance (ESG) issues.
The interaction between the EU Taxonomy, CSRD and SFDR sets the framework for the disclosure of sustainability aspects.
The mutual relationships between the EU Taxonomy, CSRD and SFDR can be clearly seen in our illustration.
As you can see, the three sets of rules are closely interrelated and even overlap in terms of content.
First of all, the EU Taxonomy provides a classification system for sustainable economic activities, which is applied within the framework of the CSRD and SFRD.

Zusammenhang von CSRD, SFDR und EU-Taxonomie

The CSRD obliges companies to report on various ESG aspects.
Affected companies must also provide information on three key indicators of the EU taxonomy – namely the proportion of taxonomy-eligible economic activities

of total sales
in capital expenditure (CapEx) and
operating expenses (OpEx).

The EU taxonomy and CSRD also play a role in the SFDR.
Financial market participants and financial advisors must report on key figures from the EU taxonomy for their ESG financial products that promote environmental or social characteristics or have a completely sustainable investment objective.
This requires information on the proportion of a financial product that invests in taxonomy-compliant activities.
For example, information is requested on greenhouse gas emissions, consumption and production of non-renewable energy, wage differences and gender diversity.
The financial service providers in turn obtain this sustainability-related information from the CSRD reports of the companies in which they invest.
However, there is currently a certain amount of tension.
The CSRD, i.e. the obligation to prepare a sustainability report, does not yet apply to many companies.
It will be introduced in stages from 2024.
The group of companies subject to reporting requirements will only gradually expand from 2025.
However, due to the SFDR, many companies already have to report sustainability information to financial market participants if they require a loan or investment.
It is therefore clear that it is worthwhile for companies to start reporting and collecting data at an early stage.

Why is sustainability important for companies?

There are numerous reasons to make a company more sustainable.
Firstly, there is growing pressure from outside – from regulatory requirements, for example, but also from customers, business partners and competitors.
But current and potential employees are also paying more attention to how their (future) employer acts and whether this is compatible with their views.

Sustainability can therefore provide a competitive advantage, strengthen the brand, increase employee motivation, retain customers and create new jobs, among other things.
As we have seen above, it also helps in the search for investors.
And, of course, a company makes a contribution to protecting our planet.
You can find numerous studies that prove this in the blog post“Why is sustainability important for companies?”.

We support you with the ESG report

You should therefore start collecting the relevant sustainability information in your company at an early stage.
You can save yourself a lot of time and effort by using specialized sustainability software such as the VERSO ESG Hub.
Our sustainability experts will also support you throughout the entire reporting process – from the materiality analysis, strategy and carbon footprint to the final reporting.

Please write to us. We can help you.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

28.11.2024

ESRS report structure: How to report in compliance with CSRD

Read article

03.11.2023

ESG in financing: This data decides on loans

Read article

Subscribe to our newsletter!

Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
Best practices in the areas of ESG and sustainable supply chains
Developed with expertise from 12+ years of sustainability management
Sustainability events and much more.

Guide: How do I develop an effective sustainability strategy for my company?

How do I develop a sustainability strategy for my company?

1. status quo and key topics

Activate the complete ESRS checklist here

2. define SMART objectives and suitable measures

3. create an awareness of sustainability throughout the company

Your overview of the new Green Claims Directive

4. it’s time for implementation: control is the be-all and end-all

Develop a sustainability strategy: VERSO supports you!

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

ESG regulations oblige executives: What management boards, supervisory boards and management should do now

ESRS report structure: How to report in compliance with CSRD

Subscribe to our newsletter!

Get to know the software!

Why is sustainability important for companies? Facts & Figures 2024

5 facts why sustainability is important for companies

How do I create a sustainability report?

Sustainability ensures economic success

Practical guide to CSRD

Sustainability secures the future of companies

Stronger customer loyalty through sustainable business practices

CSRD: New requirements for sustainability reports

Sustainability – the key to motivated employees

Sustainability creates jobs

Overwhelmed by the CSRD?

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

5 reasons why a sustainability report is also worthwhile for SMEs

5 advantages of a decarbonization strategy: Why it is important for companies

Subscribe to our newsletter!

Get to know the software!

Green Claims Directive: EU takes action against greenwashing

Environmental information is often misleading

CSRD: New requirements for sustainability reports

The EU’s response: the Green Claims Directive

Which environmental claims are affected by the Green Claims Directive?

Will “green claims” be banned?

What are the consequences of the Anti-Greenwashing Directive for companies?

What does the directive achieve against greenwashing?

We support you with your sustainability communication

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

This might also interest you:

Sustainability Report: What Is It and What Do You Need to Know?

The five biggest greenwashing traps and how to avoid them

Subscribe to our newsletter!

Get to know the software!

5 reasons why a sustainability strategy is important for companies

To get started: What does a sustainability strategy say?

Whitepaper: The ESRS at a glance

Sustainability strategy: 5 advantages for companies

1. effective risk management and greater resilience

5 Sustainability measures with impact

2. efficient use of resources and employees

3. holistic orientation and long-term planning

The double materiality analysis in 7 steps

4. meet the requirements of standards such as ESRS

5. targeted communication of ESG issues

Step-by-step to the sustainability report

Conclusion: A sustainability strategy is worthwhile for companies

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

We support you!

This might also interest you:

ESG in financing: This data decides on loans

Sustainability Report: What Is It and What Do You Need to Know?

Subscribe to our newsletter!

Get to know the software!

5 reasons why a sustainability report is also worthwhile for SMEs

Which stakeholders request ESG data from SMEs

1. business partners create transparency in the supply chain

2. financial sector pays more attention to sustainable investments

All information about the SFDR

3. banks require ESG disclosures in loan and funding procedures

This data decides on loans

4. insurance companies also include ESG risks in their financial statements

5. customers and partners expect proof of ESG efforts

CSRD compliance made easy

How do SMEs best prepare for sustainability requirements from stakeholders?

Step-by-step to the sustainability report

Do you want to be prepared for the next request?