Sustainability – a buzzword that is used inflationarily today and often degenerates into a green fig leaf. And yet the term is more relevant and present than it has ever been before. This is expressed in the concepts of CSR Corporate Social Responsibility as a management approach and ESG Environment – Social – Governance as a management approach from the investor’s point of view.
Since 2024 at the latest, the topic of sustainability has been at the top of the agenda for many companies. The Corporate Social Responsibility Directive (CSRD) takes sustainability reporting to the next level and brings a significant expansion for companies. Since January 1, 2024, companies that are already subject to the Non-Financial Reporting Directive are required to report. In the next stage, CSRD will also apply to large corporations, and subsequently also to small and medium-sized enterprises with a capital market orientation.
Without compliance with ESG criteria, it is becoming increasingly difficult for medium-sized companies to attract customers, investors and new employees and to convince banks. However, many questions arise when it comes to the concrete fulfilment of ESG factors. The overarching issue is to take the right approach to ensure that the ESG criteria are optimally integrated into one’s own business strategy and play their part in ensuring that the company acts responsibly and thus remains viable and competitive in the future.
Many people first think of environmental protection, climate protection and decarbonisation when they hear the word “sustainability”. But sustainability is much more than that. The wide range is reflected in the ESG criteria. ESG stands for “Environment”, “Social” and “Governance”. It is not only about the “E”, but also about the “S” and “G”. It is only through the interaction of the three areas of environment, social affairs and corporate governance that a sustainable corporate orientation unfolds, which improves growth opportunities and financing advantages and makes the company more resilient. The individual weighting of the three areas differs depending on the sector and size of the company. For example, the area of “environment” can have a much higher relevance for an industrial company than for a service provider.
Acting ethically and responsibly is a matter of course for most entrepreneurs. The concept of the “honourable merchant” goes back to the Middle Ages and still has an important meaning for German companies. However, Germany is very much involved in global divisions of labour and along the supply chains there are always grievances in the economic, ecological, and humanitarian spheres. This should change. With the Supply Chain Due Diligence Act, or Supply Chain Act for short, a law was passed that obliges companies based in Germany to implement defined due diligence obligations. It came into force on 1 January 2023 and aims to protect human rights along supply chains, improve working conditions and protect nature from harmful impacts. In concrete terms, companies should ensure that human rights and minimum standards such as the prohibition of child and forced labour are observed through responsible management of supply chains.
It is increasingly important for medium-sized companies to meet sustainability criteria and to make this visible. In the overall economic structure, they are always part of a larger supply chain and thus bound by the sustainability requirements of other stakeholders. Demands on SMEs also come from banks and insurance companies. This is because the ESG criteria that a company implements are playing an increasingly important role in the financial sector against the backdrop of sustainable finance and are important when lending to an SME. In addition, the expectations of customers and employees are becoming increasingly concrete. But how specifically does an SME go about thinking, acting, and deciding in terms of sustainability? The topic of sustainability is complex. There are 20 important sustainability criteria, which include, for example, “innovation and product management”, “resource management” or “employee rights”. Therefore, the key question is: Where is the topic of sustainability relevant in the company at all?
Last Friday, July 29, 2022, our Karlsruhe location once again became a mini-campus for a few hours. We at THE MAK`ED TEAM were all very excited when four students and their course director Prof. Dr. Susanne Steimer from the Mannheim School of Management (HdWM) came to our office. Here they presented their practical project, which was also an examination situation. In the project, the students dedicated themselves entirely to the topic “Creation of a sustainability check for small and medium-sized businesses” according to an assignment by THE MAK`ED TEAM. During the elaboration they were actively supported by THE MAK’ED TEAM and developed our case study with great commitment. In their final presentation, the students showed a clearly structured roadmap of what a sustainability check for medium-sized companies across all industries could look like. In the end, they presented a convincing sustainability check for medium-sized companies, which can be carried out in different variants, from a short check-up to an individual workshop. Using well-chosen questions and a traffic light system in the evaluation, the check clearly shows the respective company how sustainably a company is currently positioned and in which areas.
After the all-around convincing and very clearly structured presentation, open questions were clarified in the round and lively discussions were held. THE MAK`ED TEAM has been cooperating with the HdWM since 2021 and focuses on sustainable corporate management. We were also very impressed by this joint project and are already looking forward to the next one.
ESG is not a trend, but the way to responsibly shape the future. But what about ESG compliance in your own company? ESG stands for Environmental, Social and Governance and medium-sized companies are confronted with this in many areas. A sustainable ESG concept helps a company to define and achieve its sustainability goals, to be attractive to banks and to increase the value of the company. When developing and implementing such an individual concept, many questions arise that need to be clarified. A systematic and structured approach ensures the necessary transparency here.
What was previously very good for SMEs, but not mandatory, is becoming a “must have”: CSR reporting is moving into the SME sector and will be given a permanent place in the management report as of 1 January 2024. This puts non-financial, i.e. sustainable reporting, on the same pedestal as financial reporting.
The EU Commission’s planned changes to the extended reporting obligation are not surprising; after all, the sustainable contribution of all companies plays an important role in Europe’s sustainability transformation. Here, reporting is the toolbox to ensure the implementation of these sustainable economic measures.
The topic of sustainability is gaining strength. The background is the EU Green Deal, with which the European states want to gradually make the EU climate-neutral by 2050. The financial markets have a decisive role to play in the implementation of the climate policy goals, as they promote and anchor the issue of sustainability. “Sustainable finance” is the new buzzword. It means that sustainable aspects of a company regarding the environment, social issues or corporate governance are included in the decisions of financial actors. Sustainable finance is synonymous with supervision and regulation of the financial markets towards more sustainability in companies – and that also in small and medium-sized enterprises. In the future, banks will give more weight to sustainable aspects when granting loans, regardless of the size of the company, and make sure that their loan portfolios are in line with the EU taxonomy, which will come into force in 2022 and place greater emphasis on environmental aspects.
Personnel development – some entrepreneurs don’t like to hear this word. In most cases, it is closely linked to expensive seminars, training courses and further education. And these expensive measures haven’t brought the success that the company expected, often. “No wonder”, the expert thinks, and we show what personnel development means and why personnel development is more important than ever for the success and growth of companies.
