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Sustainability reporting

What is the aim of the new Corporate Sustainability Reporting Directive?

On January 5, 2023, Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive, CSRD) entered into force. The aim of the new CSRD is to provide publicly accessible and comparable information on companies’ risks and opportunities in relation to sustainability aspects, and, by doing so, ultimately to promote the transition to a sustainable and competitive economy in the meaning of the Green Deal. In particular, the CSRD replaces the non-financial reporting requirements that Directive 2014/95/EU (CSR Directive) enshrined in Directive 2013/34/EU (Accounting Directive). Companies that come under the scope of the CSRD have to prepare their (consolidated) management report in the single electronic reporting format set forth in Article 3 of Commission Delegated Regulation (EU) 2019/815 (ESEF Regulation) and are required to mark up their sustainability reporting (including the disclosures pursuant to Regulation (EU) 2020/852, Taxonomy Regulation) (Article 29d Accounting Directive).

Who does sustainability reporting apply to?

The rules will start applying

  • from the financial year beginning January 1, 2024 for share capital companies with more than 500 employees already subject to the Non-Financial Reporting Directive (NFRD),
  • from the financial year beginning on January 1, 2025 for large companies (as defined in Section 267(3) HGB) that are currently not subject to CSR,
  • from the financial year starting from January 1, 2026 for listed SMEs and small and non-complex institutions (Article 4(1)(145) of Regulation (EU) No. 575/2013).

What standards apply to reporting?

On July 31, 2023, the European Commission issued the Delegated Regulation as regards sustainability reporting standards. This regulation refers to the requirements of the Corporate Sustainability Reporting Directive (CSRD) and contains twelve European Sustainability Reporting Standards (ESRS) in Annexes I and II:

  • ESRS 1: General requirements
  • ESRS 2: General disclosures
  • ESRS E1: Climate change
  • ESRS E2: Pollution
  • ESRS E3: Water and marine resources
  • ESRS E4: Biodiversity and ecosystems
  • ESRS E5: Resource use and circular economy
  • ESRS S1: Own workforce
  • ESRS S2: Workforce in the value chain
  • ESRS S3: Affected communities
  • ESRS S4: Consumers and end-users
  • ESRS G1: Business conduct

The Commission Delegated Regulation – and therefore the ESRS – will apply from Januray 1, 2024 for financial years beginning on or after January 1, 2024.

As this is a regulation, it applies directly in all EU Member States, so no transposition into national law is required.

When and how does the sustainability report have to be disclosed?

In future, the sustainability report is required to be part of the (consolidated) management report. Its location in the (consolidated) management report means the sustainability report has to be published in electronic form together with the (consolidated) management report and the auditor’s opinion. In the case of share capital companies within the meaning of Section 264d of the German Commercial Code (HGB), the provisions of Section 325(4) HGB apply, which requires them to publish the (consolidated) management report – in future then including the sustainability report – no later than four months after the balance sheet date.

How does the ESEF-Manager support the preparation of the sustainability report?

Reporting companies will be required to present sustainability information for the current financial year in the management report and to provide digital tagging for it. The ESEF-Manager already offers tagging as a feature to meet this requirement. In particular, Textblock-Tagging, which is already possible with the ESEF-Manager, will be used to mark up the information.

How does the ESEF-Manager support the audit of the sustainability report?

A key part of the revision of the legal basis for European sustainability reporting is increasing confidence in the credibility of the information provided. For this reason, the CSRD sets forth a mandatory audit of the sustainability report by accredited independent auditors. The ESEF-Manager offers the possibility to technically validate reporting packages.

Like to learn more about the ESEF-Manager? Then simply contact us! We will gladly advise you.