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.

Based on the European objective of transforming the economy towards climate neutrality and strengthening sustainability through the Green Deal, the sustainability aspects will be subject to mandatory reporting. These aspects, consisting of environment, social and governance, are deliberately interpreted broadly.

Sustainability reporting is considered to be the biggest change in accounting for many years. Even if communication about sustainability activities takes place under marketing aspects, reporting on them is part of financial reporting and is therefore enshrined in law and, of course, subject to audit for the obligated companies.

In addition, the perspective has changed: while the annual financial statements depict the company as a whole, the sustainability view also includes the value chains and product life cycles.

Indirect Obligation for medium-sized Companies

If, in addition to capital market-oriented companies, large corporations and all companies required to prepare consolidated financial statements are also required to prepare sustainability reports from the 2025 financial year onwards, this will result in far-reaching reporting obligations for small and medium-sized companies. These result from the significantly higher number of directly obligated companies from 2025 onwards, which will consider their value chain for their reporting obligations and make information claims in this way. We believe that a large number of companies will have to collect and compile sustainability information by monitoring the supply chain of a company subject to the obligation.

In addition, the regulation of the financial sector under the heading of sustainable finance means that the finance and insurance industries will (have to) consistently demand information on the sustainability performance of their customers.

Materiality at the Core

The complexity of the requirements and the multitude of sustainability aspects pose correspondingly great challenges for companies. In addition to simply fulfilling their obligations, companies should use their sustainability reporting activities for the further development of their company. The topics of good corporate governance, social issues and the environment are already being actively shaped in the vast majority of companies. This is therefore a good basis for further development and reporting.

Sustainability reporting is therefore based on sustainability management. Both can be easily integrated into a company’s management system. The basis for this can be a roadmap that plans the establishment and structures the key areas.

In this way, the reporting obligations resulting from the so-called double materiality can be identified. On the one hand, this dual materiality looks at the outside-in perspective and highlights the risks and opportunities in the same way as financial reporting. This corresponds to the usual perspective of shareholders and banks as investors. On the other hand, there is the inside-out perspective. This looks at the effects of the company’s actions on its environment – i.e. a stakeholder perspective.

The structured approach makes it possible to make the high level of abstraction of the regulations and existing literature tangible and to break it down to your own company. When the aspects become concrete, the resulting questions can be dealt with easily.

Time Horizon

Sustainability is a topic for the future and we recommend that you check where your company stands, what obligations it has and how you would like to develop your company in the relevant areas. Reporting will then also be possible step by step. THE MAK’ED TEAM supports you in developing your individual sustainability strategy.

More about Sustainability.