The EU remains strongly committed to sustainability and is calling on many companies to prepare comprehensive sustainability reports. This has a direct impact on the responsibility of board members and managing directors. In this post, we summarize the key points you should know.

Since 2017, large companies, credit institutions and insurance companies, which employ more than 500 people on an annual average, have been required to submit non-financial reports. It covers topics such as environmental concerns, workers' rights, social responsibility, human rights and anti-corruption. It is discussed to what extent these reporting requirements also have an impact on the due diligence obligations of directors and managing directors. However, it is important anyway that business managers make well-founded decisions based on appropriate information, including sustainability aspects.

The EU has now expanded non-financial reporting and converted it into more comprehensive sustainability reporting. The so-called Corporate Sustainability Reporting Directive (CSRD for short) has come into force at EU level and must now be implemented by the member states. This significantly expands the number of reportable companies in the EU. In Germany, around 15,000 companies will be affected by the new sustainability report in the future. A total of over 50,000 companies are affected, while the NFRD has so far only covered around 11,700 companies across the EU.

Companies that are already required to report non-financial under the NFRD must prepare sustainability reports from January 1, 2024. From January 1, 2025, all large corporations and parent companies of large groups that exceed two of the following three criteria on two consecutive reporting dates are subject to reporting: EUR 20 million balance sheet total, EUR 40 million revenue, 250 employees on an annual average. From January 1, 2026, small and medium-sized capital market-oriented companies will also be required to submit a sustainability report. However, they have the option to request a justified opt-out in the first two years.

Companies must provide comprehensive information in their sustainability reports, including a description of their business model and strategy related to sustainability aspects. They should also describe their sustainability goals, policies and the role of their administrative, management and supervisory bodies, as well as identify potential negative effects of their business activities and value chains. The aim is to provide an understanding of the impact of sustainability aspects on the company and business performance.

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