The Digital ESG Command Centre for Your Business

The key ESG criteria (Environmental, Social, and Governance) for German businesses are based on the requirements of the CSRD (Corporate Sustainability Reporting Directive) and the European Sustainability Reporting Standards (ESRS). In addition, there are other relevant standards and frameworks such as the ZNU Standard, the Global Reporting Initiative (GRI), and the German Sustainability Code (DNK), which support businesses in sustainable reporting and implementation.

Environmental

1. Climate Change:

• Greenhouse gas emissions (Scope 1, 2, and 3)
• Strategies for reducing emissions and adapting to climate change
• Use of renewable energy and energy efficiency

2. Resource Management:

• Water consumption and management
• Waste management and recycling rates
• Use of raw materials and materials, including sourcing from sustainable suppliers

3. Biodiversity and Ecosystems:

• Measures to protect biodiversity
• Impact of business activities on natural habitats
• Conservation and restoration of ecosystems

4. Environmental Pollution:

• Emissions of pollutants into air, water, and soil
• Strategies to prevent and reduce environmental pollution

Social

1. Employee Rights and Conditions:

• Compliance with labour standards and fair working conditions
• Health and safety in the workplace
• Measures to promote work-life balance

2. Equality and Diversity:

• Promoting gender equality and diversity in the workforce
• Inclusion and diversity programmes

3. Training and Education:

• Investments in employee training and development
• Professional development and continuous education programmes

4. Human Rights:

• Compliance with human rights throughout the supply chain
• Measures against child labour, forced labour, and other human rights violations

5. Community and Society:

• Engagement and contributions to the local community
• Social projects and sponsorships

Governance

1. Ethics and Integrity:

• Implementation and adherence to ethical guidelines
• Measures to combat corruption and bribery

2. Risk Management:

• Implementation of risk management systems
• Monitoring and management of ESG risks

3. Corporate Structure and Transparency:

• Transparency in corporate governance and decision-making processes
• Disclosure of the executive remuneration structure

4. Stakeholder Engagement:

• Communication and collaboration with stakeholders
• Consideration of stakeholder interests in decision-making processes

5. Data Protection and Information Security:

• Protection of personal data and cybersecurity measures
• Compliance with data protection laws and regulations

Other Frameworks and Standards

1. ZNU Standard:

• The ZNU Standard for Sustainable Business provides companies with a practical management system for integrating sustainability across all business areas and is particularly used by small and medium-sized enterprises (SMEs) in Germany.

2. Global Reporting Initiative (GRI):

• The GRI Standards are globally recognised guidelines for voluntary sustainability reporting. They provide detailed requirements for reporting on a wide range of ESG topics and promote comparability and transparency.

3. German Sustainability Code (DNK):

• The DNK is a national standard for reporting on sustainability aspects, particularly tailored to the needs of small and medium-sized enterprises. The Code includes 20 criteria and enables a structured and transparent presentation of sustainability achievements.

These comprehensive criteria and frameworks help German and EU companies systematically capture, evaluate, and transparently communicate their sustainability efforts. This not only contributes to sustainable development but also enhances the reputation and competitiveness of companies.

There is an ESG reporting obligation for small and medium-sized enterprises (SMEs) under the Corporate Sustainability Reporting Directive (CSRD), but this obligation is specifically limited to listed SMEs and will be phased in gradually.

ESG Reporting Obligation for SMEs under the CSRD

Listed SMEs (LSMEs):

• SMEs listed on regulated markets within the EU are required to report on ESG matters. These companies must comply with the CSRD requirements starting from 1 January 2026.

Non-listed SMEs (VSMEs):

• Non-listed SMEs are generally not directly affected by the CSRD. However, they may be indirectly impacted if they are part of the supply chains of large companies that fall under the CSRD. These large companies may request sustainability information from their suppliers to meet their own reporting obligations. The voluntary VSME Standards address this issue.

Reporting Content for SMEs

Reports from listed SMEs must include information on environmental, social, and governance aspects that comply with the European Sustainability Reporting Standards (ESRS). These standards provide detailed requirements for reporting and include, among other things:

• Environmental aspects: Climate and environmental impacts, energy consumption, resource use, and emission reductions.
• Social aspects: Working conditions, diversity and equality, health and safety at work, and human rights in the supply chain.
• Governance aspects: Corporate governance, risk management, ethics policies, and anti-corruption measures.

Support and Relief for SMEs

The CSRD acknowledges the unique challenges faced by SMEs in ESG reporting. Therefore, the following supportive measures are provided:

• Simplified reporting: Reporting requirements for SMEs are simplified and less extensive compared to large companies.
• Training programmes and guidelines: SMEs receive support through training programmes and guidelines to better understand and implement the new requirements.
• Technical support: Technical assistance is provided to make reporting more efficient and cost-effective.

Conclusion

While non-listed SMEs are not currently directly affected by the ESG reporting obligation under the CSRD, listed SMEs will be required to prepare comprehensive ESG reports starting in 2026. These reports should be transparent, comparable, and document the companies' sustainability performance. Indirect effects on non-listed SMEs may arise through supply chain requirements, which would require them to provide sustainability information as well.

Creating ESG reports with specialized and professional ESG software like leadity offers numerous benefits that can significantly improve the accuracy, efficiency, and quality of reporting. Here are the main reasons why companies should create ESG reports using leadity software:

1. Automation and Efficiency

• Time-saving: ESG software like leadity automates many processes that would otherwise have to be done manually. This includes data collection, processing, and analysis.
• Reducing workload: Automation can significantly reduce the workload for reporting, which is particularly advantageous for SMEs with limited resources.

2. Accuracy and Consistency

• Error reduction: Manual data entry and processing are prone to errors. Leadity minimizes these errors through standardized and automated processes.
• Consistency of data: leadity ensures that data is captured and processed consistently, improving comparability across different reporting periods.

3. Data Integration and Management

• Centralized data management: A top ESG software like leadity enables the integration and centralization of all relevant data in one place, simplifying management and analysis.
• Real-time data: With excellent ESG software like leadity, companies can capture and process data in real-time, leading to more up-to-date and relevant reports.

4. Compliance with Standards and Regulations

• Regulatory compliance: The comprehensive ESG software solution leadity ensures compliance with various reporting standards and regulatory requirements, such as the CSRD/ESRS, GRI, DNK, and the ZNU standard.
• Up-to-date: leadity is regularly updated to account for new legal requirements and reporting standards.

5. Transparency and Traceability

• Documentation and audit trail: The ESG software leadity provides features for detailed documentation of all processes and data, improving traceability and verifiability.
• External audit: A well-structured and documented data foundation facilitates external audits and verification of reports.

6. Reporting and Visualisation

• Report generation: The leadity software provides tools for automatically generating reports that meet the needs of various stakeholders.
• Visualisation: The scientifically-based ESG software solution leadity includes features for visualising data on dashboards, which helps communicate sustainability performance.

7. Benchmarking and Performance Analysis

• Comparison analysis: leadity allows companies to analyse their performance against industry standards and competitors.
• Progress tracking: Companies can track and analyse their progress towards sustainability goals.

8. Stakeholder Engagement

• Transparent communication: Well-structured ESG reporting supports transparent communication with investors, customers, employees, and other stakeholders. With leadity, these can be directly involved in the materiality analysis.
• Building trust: Through transparent and consistent reporting, companies can strengthen the trust of their stakeholders.

Conclusion

Using professional ESG software like leadity offers significant benefits for creating ESG reports in terms of efficiency, accuracy, transparency, and compliance with regulations. This allows companies not only to meet legal requirements but also to improve and better communicate their sustainability performance.