Unclear regulations, clear advantages: How sustainability reporting creates business value

published on 11 february 2025 | Reading time approx. 3 minutes

New reporting obligations, growing bureaucracy and unclear deadlines – the requirements surrounding sustainability reporting (CSRD, EU Taxonomy, LkSG, CSDDD) pose major challenges for companies. Sustainability reporting is complex, and its implementation is currently characterized by uncertainty. However, instead of being paralyzed by this uncertainty, it is worth taking a strategic approach to sustainability processes in the corporate context. After all, those who merely adhere to the regulations may miss out on a crucial opportunity. Sustainability reporting is more than just a bureaucratic burden – it can become a real competitive advantage.

First-time reporting: Why many companies underestimate the effort

Sustainability reporting presents companies with new challenges – especially when implementing it for the first time. Regulatory requirements such as the CSRD/ESRS or the EU taxonomy demand the collection of numerous new key figures, the procurement and validation of which involves considerable effort. This leads to high costs for collection, documentation, verification and publication.

This is also shown by a survey published in 2024 by the German Investor Relations Association (DIRK), in which 90 DIRK member companies took part. According to the survey, companies already subject to reporting requirements under CSR-RUG expected the new reporting obligations to require 50% more staff on average, while companies that only became subject to reporting requirements in course of the CSRD often underestimated the effort involved.¹

Targeted sustainability strategies through materiality assessment and gap analysis

The materiality assessment is a mandatory component of the ESRS and must follow the guidelines and conceptual specifications of ESRS 1 and 2, which leads to a minimum level of complexity and implementation effort. So why not make the best possible use of this mandatory task to generate added value? While the materiality assessment helps to prioritize relevant topics, the gap analysis is necessary to ensure a realistic estimation of the resources and the effort required.

DEVELOPING A TARGET-ORIENTED FOUNDATION THROUGH THE MATERIALITY Assessment

Conducting a neat materiality assessment as part of CSRD reporting is crucial for companies and should not be seen as a bureaucratic burden, but as a strategic opportunity, as this step can lay the foundation for a company's sustainability strategy.

A well-conducted materiality analysis makes it possible to identify the topics that are important for the company and its stakeholders and thus to focus reporting on the material sustainability aspects and take out immaterial topics.

To be able to implement an efficient, targeted and holistic sustainability process that can deliver added value and insights for a company, it is crucial that companies identify those topics that are actually relevant to them in the context of sustainability as part of the materiality assessment – instead of trying to eliminate “inconvenient” topics. By addressing the material topics in the subsequent sustainability reporting process, in-depth knowledge is gained in these areas. The insights gained provide important information for strategic decisions, risk management, controlling and operational management processes, which can lead to decisive long-term benefits for companies.

GAP ANALYSIS AS A TOOL FOR REALISTIC RESOURCE PLANNING

A gap analysis provides an initial assessment of how much time and resources are required for the reporting process. In order to actually be able to use sustainability reporting as an opportunity, it is crucial to plan the necessary resources and time for it. If the sustainability reporting process merely becomes additional work for individual employees, reporting often remains just an item on the to-do list. If the actual need and the necessary resources are recognized at an early stage and planned in a targeted manner, new perspectives open up. In this way, reporting can not only meet legal requirements, but also provide valuable strategic insights and long-term benefits for the company.

Re-evaluation and optimization of responsibilities and processes

Many medium-sized companies have already been committed in certain areas such as environmental protection, employee matters and social responsibility for years. In owner-managed companies in particular, this commitment is often deeply rooted in the corporate culture.

Given the significant increase in regulatory requirements, it is important to critically question the responsibilities and processes that have often grown historically and to strive for a clearer alignment of sustainability activities and the optimization of a lean data collection and documentation.

An efficient approach is to assign tasks based on the core competencies of the departments involved. This not only holds potential for increased efficiency, but also opens up the possibility of integrating new perspectives and impulses that can further develop the company strategically.

The growing importance of sustainability in companies

Sustainability is becoming increasingly important in the corporate landscape. This is also reflected in studies. According to the Sustainability Transformation Monitor 2023, a study by respected institutions such as the Bertelsmann Foundation and the University of Hamburg, 84% of those responsible for sustainability in the real economy say the topic has become “more important” or “much more important”. In the financial sector, this statement was also made by 73% of respondents.²

Not only regulatory pressure, but also the growing demands of customers, employees and investors are important factors in this development trend. Companies should be aware of their own impact on stakeholders as well as existing and potential risks and opportunities arising from sustainability issues on their own company, to enable crucial business decisions to be made at an early stage based on transparent data. The materiality assessment is an important element to create alignment and thus added value.

1) DIRK(2024): DIRK-IR-Guide, Band XVII – CSRD/ESRS: Organisatorische Umsetzung der neuen ESG-Reporting-Pflichten; https://www.dirk.org/wp-content/uploads/2024/06/240614_DIRK-IR-Guide-XVII-CSRD_ESRS-Organisatorische-Umsetzung-der-neuen-ESG-Reporting-Pflichten_Webversion.pdf?utm_source=chatgpt.com

2) Universität Hamburg, Peer School for Sustainable Development, Bertelsmann Stiftung (2023): Sustainability Transformation Monitors; https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/Sustainability-Transformation-Monitor_2023.pdf