CSRD Roadmap 2025 – Implementing Audit-Proof Sustainability Reporting

The CSRD should have been transposed into national law by July 6, 2024. Since it has not yet been implemen­ted, the EU Commission initiated infringement proceedings against Germany and 16 other EU member states on September 26, 2024. At the latest since the coalition government broke up, timely adoption in 2024 is considered uncertain – however, there will only be final clarity from December 20, 2024, when the last plenary session of the Bundestag takes place in the current calendar year. Without an implementation law, the Non-Financial Reporting Directive (NFRD) and its German implementation in the form of the CSR Directive Imple­mentation Act (CSR-RUG) from 2017 will continue to apply, according to which large capital market-oriented companies with more than 500 employees are obliged to prepare a non-financial statement in accordance with §289b HGB.  

Due to the fact that the CSRD is a valid and mandatory EU directive, and the corresponding government draft has been available since July 2024, it can be assumed that it will be transformed into German law in the course of 2025 at the latest. As retroactive application for current financial years is likely to be legally permissible according to a legal opinion commissioned by the IDW, nothing will change initially for companies that are only required to report from the 2025 financial year onwards: the first ESRS-compliant sustainability report (covering the 2025 financial year) is due for publication in 2026. The ESRS and thus the specific content requirements for the sustainability report were already adopted as a delegated act in July 2023 and are therefore directly valid and applicable even if the CSRD has not yet been implemented at national level. Observing the following tips and advice will ensure that the process of preparing the sustainability report for the first time runs as smoothly and efficiently as possible. ​

The double materiality assessment serves as the central foundation for ESG reporting and is a key requirement under the ESRS (specifically ESRS 1, Chapter 3). Its purpose is to identify the key sustainability matters of a company that have positive or negative impacts on people and the environment through its business activities or its upstream and downstream value chain (impact materiality) or that entail financial risks and opportunities for the company (financial materiality). The matters identified as material form the basis of the specific content in the sustainability report. The process for conducting the materiality assessment should therefore be thoroughly documented and coordinated early on with the auditor​. The time required for this assessment should not be underestimated: if your company is subject to CSRD reporting obligations starting from fiscal year 2025 and has not yet conducted the double materiality assessment, it should initiate this process as soon as possible.

Extensive reporting requirements apply to the sustainability matters identified as material. To meet these requirements, companies need a well-structured data collection plan that ensures all necessary information is accurately and completely captured. Clear responsibilities should be designated and involved early on, as the necessary data usually come not only from subsidiaries but also from various departments such as HR, compliance, or environmental management.

To manage the complexity of data collection and ensure auditability, implementing ESG software is essential. A robust software solution supports company-wide integration, particularly through centralized data collection and validation. Features such as automatic documentation of changes, version control, and the attachment of supporting evidence are especially advantageous for audit purposes. The selection of ESG software ​​should be made well in advance and tailored to the reporting requirements and specific needs of the company.

A test run of data collection before the first mandatory reporting is a sensible step to identify potential weaknesses early and implement targeted corrective actions. This can reveal any gaps in data collection and documentation, allowing for more efficient processes.

The test run simulates the entire data collection process and enables a practical check of data completeness and consistency. It also helps address common challenges, such as clear documentation of evidence or the consistent definition and collection of data. By involving all relevant subsidiaries, specific requirements of different locations can be identified early. Based on insights from the test run, companies should initiate process improvements and ensure that all collected data are audit-ready through collaboration with the auditor.

To make the final report preparation as efficient and smooth as possible, a report structure should be created and coordinated with the auditor at an early stage. The report structure ensures the organization and logic of the report and serves as a guide for integrating collected data into the ESRS display requirements. Structured data transfer, particularly for tabular information, is essential to document all content in a revision-proof manner. Ample time should be planned for review cycles and quality assurance to identify inconsistencies or unclear representations early on.

Machine-readable tagging of ESG data using XBRL technology is another CSRD requirement. However, the draft law for Germany’s CSRD implementation​ currently stipulates that this only applies to financial years beginning after December 31, 2025, as a corresponding delegated legal acthas not yet been adopted. Companies would therefore have more time to prepare for this requirement and adapt their IT infrastructure accordingly. Nonetheless, it is recommended to start addressing these future requirements now to incorporate the complexity of tagging early into processes, thereby ensuring an audit-compliant overall picture.

A strategic approach is crucial for successful and audit-compliant CSRD reporting starting in 2025. A thorough materiality assessment and a structured data collection plan form the foundation for auditable reporting. Using ESG software helps ensure data consistency and traceability. A test run of data collection helps identify weaknesses early and implement targeted optimization measures. Early collaboration with auditors​​​ as part of the report preparation process is equally important to streamline the process and ensure compliance with extensive regulatory requirements.​