Fraud risks in connection with the requirements of the CSRD

In order to make the realisation of a sustainable and decarbonised economy measurable and transparent in accordance with the targets of the EU Green Deal by 2050, detailed sustainability information will be required in future, which companies will have to publish as part of their non-financial reporting.

When the Corporate Sustainability Directive (CSRD) comes into force on 5 January 2023, companies will have to implement the requirements of the EU directive and establish corresponding measures and processes for non-financial reporting. The following periods apply

• From the 2025 financial year for the previous 2024 reporting year for companies that are already required to report in accordance with the Non-Financial Reporting Directive (NFRD)
• From the 2026 financial year for large companies over the previous 2025 reporting year that fulfil two of the following three application criteria
  • Number of employees > 250
  • Balance sheet total > EUR 20 million
  • Net sales > EUR 40 million euros
• From the 2027 financial year for all capital market-oriented small and medium-sized enterprises (SMEs) over the past 2026 reporting year

The requirements of the CSRD follow the principle of dual materiality, which assesses sustainability aspects from two perspectives ("impact materiality" and "financial materiality"). The inside-out perspective, known as "impact materiality", deals with the emissions and effects that the company has on environmental and sustainability issues. In contrast, the outside-in perspective, known as "financial materiality", deals with the environmental and sustainability issues that have an external impact on the business model and corporate management. Companies must analyse and present these perspectives in their non-financial reporting on the basis of comprehensive data and information.

In addition to general disclosure requirements, the topics covered in reporting can be categorised into environmental, social and governance issues. Here, the focus is placed, for example, on the impact of economic activity on biodiversity, the treatment of employees along the value chain or the transparency of payments and lobbying activities.

The CSRD requirements for disclosing the key figures of your value chain are diverse and complex. They require the detailed inclusion of data that was previously not subject to reporting obligations.

As part of non-financial reporting, companies must therefore also ensure that internal control processes identify possible process weaknesses, integrity risks or indications of misconduct in the data collected. Violations of the CSRD can result in fines, reputational damage, legal disputes and a loss of trust among business partners, investors and employees.  

We support you in recognising risks and establishing efficient processes and controls that help you to reduce opportunities for manipulation and implement effective mechanisms to identify and mitigate fraud risks.

If there are already indications of misconduct within existing business relationships in the form of corruption, violations of environmental protection regulations or data manipulation of sustainability or DEI data¹, we support you in investigating suspected cases in connection with the sustainability information collected and to be disclosed - through our ESG Fraud Investigations.

• Screening of business partners on environmental and social issues as well as integrity and governance
• Support in drafting the content of (third-party) codes of conduct in connection with ESG fraud
• Conducting supplier audits with a focus on labour conditions, human rights violations, diversity, equality and inclusion
• Conducting ESG fraud risk assessments including gap analyses to identify ESG risks and control weaknesses, e.g. maturity of third party management, ESG corporate culture, implementation of ESG regulations
• Support in setting up whistleblower systems and complaints procedures in accordance with the LkSG
• Support in the realisation and implementation of processes and guidelines to promote an ESG corporate culture, anti-corruption and anti-bribery, including measures to protect whistleblowers, dealing with lobbying activities and disclosure of payment practices in accordance with ESRS G1
• Implementing suitable prevention and detection measures and conducting awareness training on corruption and bribery risks and associated reporting channels
• Provision of software solutions for monitoring and managing third-party risks

¹Diversity, equity and inclusion