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The ESG regulatory project CSRD is getting closer. Why affected business entities should act quickly now and in which areas of sustainability reporting there is still a need to catch up can be read in our study.

The EU Corporate Sustainability Reporting Directive (CSRD), which will be adopted in November 2022, profoundly changes the scope and nature of business entity sustainability reporting. The CSRD will provide for the most comprehensive sustainability reporting worldwide. The draft includes twelve categories in the areas of environment, social and corporate governance (ESG) and concerns all medium-sized and large business entities in the EU.

CSRD: The time to prepare is running out

Affected business entities have only a little time left to prepare for the requirements. On 1 January 2024, the set period for business entities already subject to the Non-Financial Reporting Directive (NFRD) will end. From 1 January 2025, the CSRD will take effect for large business entities that are not currently subject to the NFRD, and 1 January 2026 will be the deadline for listed SMEs and small and non-complex credit institutions and captive insurance companies.

Global study on sustainability reporting

Sustainability is thus increasingly becoming a priority in corporate management, but there is still room for improvement.

This is shown in the twelfth edition of the KPMG Survey on Sustainability Reporting, for which financial, sustainability and environmental, social and governance reports as well as websites of 5,800 business entities in 58 countries were analysed.

Entitled “Big shifts, small steps”, the study provides information and insights for those preparing their own business entity’s sustainability report, as well as for investors, asset managers and rating agencies who are now incorporating sustainability and ESG information into their performance and risk assessments.

Important trends in sustainability reporting in Germany

ESG reporting with room for improvement

The report highlights some challenges in reporting on ESG. For example, social components are reported in less than half of the 5,800 reports, despite growing awareness of the link between the climate crisis, social inequality and resilient supply chains.

At the same time, less than half of the business entities disclosed their governance risks, for example, in internal risk management systems.

Need to catch up with respect to biodiversity

There is also a need to catch up in reporting on risks related to the diversity of species and ecosystems (biodiversity): Here, only 29 percent of the German Top 100 see a loss as a business risk, compared to 40 percent worldwide.

Sustainability representation at executive level can be improved

Furthermore, only one-third of the 100 business entities with the highest turnover have a person specifically responsible for sustainability on the management team, and less than a quarter of these business entities link sustainability to executive remuneration.

Disclosure of climate targets on the rise - Germany leads the way

But there is good news: In Germany, all of the 100 business entities with the highest turnover report on their sustainability efforts, compared to 92 business entities in 2020.

The rate of German business entities that state a target for reducing CO2 emissions is particularly high at 94 percent; worldwide, the figure is 71 percent.

About the KPMG Survey of Sustainability Reporting

The study was first published in 1993, and the twelfth edition is being published this year. It examines trends in sustainability reporting worldwide. The findings in this report reflect the current state of reporting, the gaps that should be closed to meet the legal requirements and the overarching business strategy considerations.

You can find the detailed study in English as a PDF file below.

About CSRD

The Corporate Sustainability Reporting Directive (CSRD) significantly expands existing non-financial reporting rules. This is done in accordance with the new European Sustainability Reporting Standards (ESRS). Business entities must record the effect of sustainability aspects on their economic situation and explain the impact of operations on sustainability issues.