Creating a sustainability report: a strategy for the first report

Sustainability reporting is being expanded: the CSRD replaces the previously used Non-Financial Reporting Directive (NFRD), which previously regulated reporting in the area of sustainability. The new regulation is intended to improve and standardise sustainability reports and makes more comprehensive disclosures mandatory. This has affected the first larger listed companies with more than 500 employees since the beginning of the year, all larger non-capital market-oriented companies from 2025 and even all listed small and medium-sized companies from 2026. It is estimated that almost 15,000 companies across Germany will then be required to report.

At the same time, sustainability reports are becoming increasingly important for investors, employees and the public. The pressure on companies to become more sustainable themselves and with the products and services they offer, as well as to report transparently, will not diminish. With the CSRD, the EU also wants to improve data quality, create more transparency and enable a holistic view of companies.

The obligation therefore offers the opportunity to stand out with a high-quality report, fulfil the expectations of investors and present themselves as a progressive company. Companies that are not yet obliged to report should start planning and allocating personnel in good time: They still have enough time to set up important structures so that the first sustainability report is a measurable success.

The materiality analysis: the first step towards a sustainability report

One of the requirements of the CSRD is that the sustainability report must be based on the European Sustainability Reporting Standards (ESRS). The relevant topics must first be determined using a materiality analysis in accordance with double materiality.

Specifically, this means that companies must define relevant aspects in the areas of environment, social affairs and governance in which they have significant effects or impacts. Double materiality refers to two perspectives: Firstly, in the materiality analysis, the company must consider what impact its own business activities have on the environment, climate and society. Secondly, it must consider the impact of sustainability aspects on the company's profitability. The subsequent analysis then shows which topics are most important for companies themselves and their stakeholders and where there is the greatest need for action.

There are many different ways to obtain important data for the materiality analysis. Quantitative surveys, qualitative interviews, workshops or discussions with employees, shareholders, customers, suppliers, investors, trade unions, NGOs, local residents and experts, among others, are common methods.

Depending on the size of the company, a lot of data is collected, which is why larger companies employ sustainability officers who take care of the entire process. For a comprehensive insight, you need employees from different departments who can take a holistic view of the company. The use of external service providers who have a deep understanding of sustainability reporting can be an important addition to the core team. The effort involved in a materiality analysis should not be underestimated, but it does offer the opportunity to recognise unused potential, synergies or other improvements to the operating process in addition to the pure reporting obligation.

The journey is the destination: the sustainability roadmap

The materiality analysis is one of the first steps towards a comprehensive sustainability strategy in which goals with a time frame are defined. The previously determined material topics can be summarised in groups, which should be prioritised according to the materiality analysis.

At this point, many companies often realise how much they are already doing for sustainability. This is because other regulations such as the Supply Chain Sustainability Act (LkSG), the Building Energy Act and market trends also have direct or indirect requirements that are relevant to a company's own reporting. In addition, sustainability goals and business goals are becoming increasingly intertwined. This is another reason why the CSRD stipulates that sustainability information should be published together with the key financial figures in the management report in future.

Just as companies define targets for turnover, sales, market share, number of customers or similar key figures, realistic performance indicators must also be set for sustainability targets. This could be, for example, the expansion of renewable energy sources on company premises, the reduction of CO2 emissions in production, the support of environmental protection projects, the replacement of climate-damaging raw materials, the establishment of material cycles, the introduction of new concepts for packaging, the digitalisation of analogue processes in the company or the provision of further training for employees. There are many ways to run a company more sustainably. What is feasible and sensible depends on the industry and size of the company.

Once the goals are clear, the timetable has been set and the responsible parties have been chosen, the sustainability report is finally due by the relevant deadlines, in which the analysis and the measures taken are presented.

The first sustainability report: content and structure

In recent years, various sustainability reporting standards have become established, for example the standards of the Global Reporting Initiative (GRI) or the German Sustainability Code (DNK). However, they are all superseded by the ESRS in the broader sense, because while the NFRD allowed the use of different standards, the CSRD specifies the ESRS as valid standards, although the other standards indicate which additional information and data points allow conformity with the ESRS.