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About RARENA

Consulting

Project Coordination

Moderation

Reporting

  • CSRD

References

Transition

Networks

Through various initiatives like "Financing Sustainable Growth", "Green New Deal" and "Build Back Better" the EU sets out measures to achieve the following objectives:

  • Reorient capital flows towards sustainable investment
  • Manage financial risk stemming from climate change, resource depletion, environmental degradation and social issues
  • Foster transparency and long termism in financial and economic activity

This shall be achieved by higher requirements for transparent communication of relevant, comparable and reliable sustainability information and the "merger" of financial and nonfinancial reporting. This complies with requirements from investors, but also from the civil society. After already large enterprises had to report about such "nonfinancial aspects" of their business activities, this circle is now enlarged.. Enterprises with balance sheet total >€20mn, net turnover >€40mn and employees >250 as well as all (also smaller) listed companies will be affected over time.

This ESG reporting has to be part of the annual report and financial and nonfinancial (ESG) aspects and KPIs need to have a similar level of assurance. A declaration according to EU Taxonomy Article 8, which of the enterprise's acitivities can be classified as sustainable, has to be provided as well.

So what is the scope of this ESG reporting?
The spectrum of the European Sustainability Reporting Standards (ESRS) is comprehensive and comprises the business model including its adaptation to the climate targets, management and supervisory bodies, incentive schemes and policies, risks, due diligence and measures to mitigate adverse impacts as well as sustainability related KPIs and targets and extends to the entreprise itself as well as its value chain. This makes clear that also smaller enterprises below the "reporting threshold" have to provide such information if their customers require it. The CFO of an enterprise with 240 employees told me: "We are not formally concerned, but we report voluntarily - and thus are prepared for requests from our stakeholders".

Through a stakeholder and materiality analysis the relevant aspects of the following environmental subject areas have to be determined:

  • Green house gas emissions (scope 1 – 3) and adaptation to climate change
  • Water and marine resources
  • Resource use and circular econonmy
  • Pollution prevention (air, land, water)
  • Protection of biodiversity

In addition, various aspects of social responsibility and of governance have to be specified, e.g.:

  • Responsible business practices, prevention of corruption and bribery
  • Activities and commitments of the undertaking related to exerting its political influence including its lobbying activities
  • The management and quality of relationships with customers, suppliers and communities affected by the activities of the undertaking, including payment practices, especially with regard to late payment to small and medium sized undertakings
  • Rights of employees, occupational health & safety, further training

This meets the change of societal requirements towards enterprises. Stakeholders expects that enterprises act ethically responsible and don't deteriorate (instead ideally improve) the natural and societal means of livelihood which the use through their business activitites. It's not enough any more just to comply with laws – that's just the"ethical baseline". Legitimacy ("licenso to operate") requires far better performance,,and room for manoeuvre ("license to grow") has to be earned instead of enforced. Thus, the widening of focus from just financial KPIs to a comprehensive consideration of the social and environmental aspects and stakeholder interests is essential to ensure the future of the enterprise. Nonfinancial KPIs have to be integrated in the everyday management of the enterprise, their communication to stakeholders demonstrates transparency and openness to feedback.

In this sense, CSRD respectively ESRS can be regarded as instruments to structure, unify and disseminate this reporting.

How to best prepare for it?
The best start is an analyse of strenghts and weaknesses, opportunitites and threats (SWOT) fort he enterprise A mission statement (what is the purpose of the enterprise) should be established or revised. The already referenced stakeholder and materiality analysis helps to define the focus areas and material topics. Environmental and social reporting help to gather the required KPIs. Finally, aspiration level, strategy and medium to longterm goals shall be established..

A variety of frameworks like GRI, DNK, ISO 26000, CDP, Ecovadis and more already contain the largest part of the required reporting aspects. Thus, CSRD is only seemingly new. We have longterm experience with the mentioned frameworks and can support you with your sustainability reporting.

A meaningful reporting about the effects of your business activities to society and environment conveys accountability, responsibility and a future-proof enterprise orientation.

Start CSR reporting – with conviction!