100% CSRD-Compliant

Successful ESG Management
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What ESG Stands for

ESG, which stands for Environmental, Social, and Governance, has emerged as a critical framework for evaluating a company's sustainability and societal impact. The global GRI standards help identify ESG-related aspects by giving guidelines for sustainability reporting. Additionally, the European Corporate Sustainability Reporting Directive (CSRD) further refines and standardizes reporting requirements for sustainability topics, emphasizing the importance ESG management in corporate governance.

Environmental factors include a company's carbon footprint, waste management practices, and energy efficiency efforts
Social considerations encompass issues such as diversity and inclusion, labor practices, and social contribution
Governance relates to the structure of a company's leadership, ethical decision-making processes, as well as accountability and reporting transparency

ESG Management and Its Importance for Companies

ESG management is vital for several reasons. Firstly, it enables companies to fulfill their social and environmental responsibilities to ensure that they are contributing positively to the world around them. Secondly, it empowers them to develop and execute sustainability strategies while maintaining compliance and financial success.

Societal Expectations
ESG underscores the imperative for businesses to operate with a heightened sense of social and ethical responsibility, adapting to evolving societal expectations beyond mere profitability.

Investment Impact
Investors increasingly consider ESG factors when making investment decisions, recognizing them as indicators of a company's ability to manage risks and generate sustainable long-term returns.

Regulatory Compliance
Regulatory bodies, such as the European Union, are implementing mandates like the Corporate Sustainability Reporting Directive (CSRD), requiring companies to disclose ESG-related information in periodic reports.

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CSRD and What It Includes

The Corporate Sustainability Reporting Directive (CSRD) is a pivotal regulatory framework established by the European Union to fortify corporate sustainability reporting rules. Enforced since January 5, 2023, the CSRD mandates to broaden one’s reporting scope beyond environmental concerns to include social and governance aspects. Companies covered under the previous Non-Financial Reporting Directive (NFRD) must adhere to CSRD guidelines for their reports from 2025 onwards. Other large companies need to comply by 2026, while listed SMEs have until 2027 to implement the regulations.

The initiative aims to provide stakeholders with transparent insights into companies' sustainability performance and associated financial risks. It is in line with the goals of the European Green Deal and seeks to promote accountability and transparency in corporate practices. The specific requirements regarding the structure, content, and scope of the reports are outlined in a set of 12 European Sustainability Reporting Standards (ESRS), which are applicable across different industries and were developed by the European Financial Reporting Advisory Group (EFRAG) as part of the CSRD. A key principle of these standards is dual materiality, which means that sustainability reports must cover aspects that affect the company's financial situation (outside-in) and/or have impacts on people, stakeholders, and the environment (inside-out).

Components of ESG Management

01 Identifying Relevant ESG Issues
Initially, companies gather up relevant ESG topics from all areas of their business and sort them according to priority. In doing so, companies look at their whole value chain, identify affected stakeholders, and make a longlist of all potentially significant aspects. To help, EFRAG has created an Excel overview with ESRS data points and published a guide on how to use it. In some cases, it may be useful to add more topics later that are specific to the industry or the company.

03 Double Materiality Assessment
The shortlisted topics now undergo a materiality assessment to determine if they are significant in terms of their impact and/or financial importance. Double materiality analysis is a comprehensive task, and its results require annual review for ongoing relevance. Evaluation criteria include the extent of a topic'simpact (how severe?), its scope (how far-reaching?), its immutability (can it be softened?), and its probability of occurrence. The level of detail can be freely chosen and is not restricted by ESRS guidelines.

02 Creating a Shortlist
After the longlist has been established, it is necessary to make selections and condense them into a manageable shortlist. Only those aspects that truly entail relevant impacts, risks, or opportunities for the company are included in this process. An invaluable source in this context is the company’s pre-existing risk management system, which manages corporate risks and opportunities, providing insights into their short-, medium-, and long-term effects.

04 CSRD-Compliant Reporting
Following the materiality assessment, companies compile their key topics. Subsequently, they identify the applicable ESRS indicators and determine the necessary information for inclusion in their annual reports to meet CSDR requirements. However, it is important to recognize that ESG reports serve beyond a legal obligation—they offer valuable assistance to companies in mitigating risks, preparing for audits, and demonstrating their commitment to sustainable business practices to stakeholders.

ESG Management with BIC GRC

ESG reporting can be tough for a lot of companies because of expertise gaps, inefficient data procurement, and complex compliance regulations. However, with BIC GRC's integrated workflows, ESG management becomes significantly simpler. Seamlessly generate reports that adhere to CSRD guidelines and effortlessly meet all regulatory demands.

Store policies and strategic goals in a central location
Create a transparent longlist of ESG-relevant topics
Convert topics automatically into a shortlist by adding tags
Assess impacts individually based on double materiality
Input and quantitatively assess sustainability risks and opportunities
Integrate items into your ERM system for consistent reporting
Manage and continuously monitor measures
Create custom reports structured by business areas
Receive ongoing support from a reliable consulting firm

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Centralized ESG Management

Group-wide sustainability management
All ESG-related activities in a single system
Clear responsibilities across the company

Full CSRD Compliance

Secure data storage for revisions
Transparent audit trail for tracking
Comprehensive and transparent reporting

Seamless ERM Integration

Direct link to enterprise risk management
Integrated double materiality analysis
Centralized action planning and tracking

BIC GRC proves to be a pivotal tool for us. The transition to an all-encompassing, integrated GRC solution has not only enhanced efficiency but also strengthened our strategic and risk-oriented financial management.

Claudia Maron Head of Strategic Controlling & Risk Management, DATEV