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Co2 at C-level: Sustainability on the way from soft law to hard law.

Updated: Jul 6, 2023


Blick in eine Berglandschaft mit einer meditierenden Person im Vordergrund


Introduction


The obligation to report on corporate sustainability activities has increased by leaps and bounds in recent years. And in the process, it has produced an interesting side effect: the steep career trajectory of the term "sustainability," which has finally been freed from its eco-niche. This is both an opportunity and a risk for companies that need - or want - to talk about their sustainability. Read below:

  • CSR, ESG & Co. - what is hidden behind the abbreviations and what they are supposed to achieve.

  • Interesting insights into a grandiose career - namely that of the term "sustainability"

  • Snapshots into companies that take sustainability seriously and proactively embed it internally.



Co2 footprint – an issue for the CEO


"Sustainability" is the megatrend of our time. However, opinions are divided on what sustainability actually means. While some companies are already offering an internal award for a suitable and feasible definition of sustainability, the topic of sustainability is moving step by step up the stairs to the board of management.


Because the requirements for general sustainability reporting by companies are currently undergoing profound and lasting change. And so sustainability reports are sprouting up like mushrooms. Let's take a look at the most important concepts.



CSR: the soft gear


CSR is short for corporate social responsibility, and it began to appear in companies in 2000. A CSR report contains information about a company's activities that make a positive contribution to society: donations to social institutions, planting trees, reducing waste, using sustainable materials and much more. It's no wonder that many a CSR report looks more like an image brochure than a factual report.


In this sense, CSR represents a model in which corporate activities aim to positively influence the world around the company. In this respect, the CSR report tends to be characterized by qualitative statements and specifications:



CSR: Doing good. Avoid bad.


ESG: The tougher pace


The concept "ESG" stands for "Environment", "Social" and "Governance" and was first circulated by Swiss financial strategist Ivo Knoepfel in 2004.


ESG or: Who cares, wins

The birth of the term ESG was the 2004 study "Who Cares Wins? Which was commissioned by Kofi Anan (United Nations) and produced by Knoepfel. "From the beginning, ESG was an attempt to escape the hitherto vague definitions of ethics, sustainability or responsibility and instead quantify the financial risks of unsustainable corporate strategies. Annan recognized even then the scope of finance and its impact on the environment," Knoepfel said in a 2018 interview with Institutiol Money.

Knoepfel has remained rather unknown. And even its acronym only replaced CSR as a "soft" version of reporting in 2020, relying much more on a quantitative approach. ESG reporting collects, discloses and develops data on a company's environmental, social and governance activities. In this way, a company's stakeholders gain knowledge about the impact of the company's activities in these areas.


ESG is increasingly becoming the bigger sister of the old credit rating à la Fitch & Co. This is because ESG reports are intended to enable investors in particular to check the qualitative and quantitative benefits of a company's ESG measures, and thus avoid companies where there is a risk of environmental damage, social missteps or corruption.


In the optimal case sustainability is the motivation and the ESG report the fact-based result.


So even if ESG reports are primarily of interest to investors to check their investments, the creation of disclosure standards such as those provided by ESG is intended to anchor the "sustainability" megatrend in companies' business strategies, processes, product developments, operations and policies, and to make measurable performance data on sustainability activities transparent.



Do I have to, should I, and if so, how?


Sustainability reporting has thus already become increasingly embedded in the activities of companies. That has often happened on a "voluntary" basis, so as not to fall behind social developments and requirements. So far only a few companies have been affected by a reporting obligation. Which ones was defined by the CSR Directive Implementation Act (CSR-RUG), which implemented the European Non-Financial Reporting Directive (NFRD) in Germany. However, whether voluntary or not, one question preoccupies all companies that deal with sustainability reporting: the question of "how". There were no clear guidelines, even within the framework of the CSR RUG. Each company could choose for itself which national or European sustainability reporting standards it wanted to use.


But the agony of choice is soon over… and not only that.



CSRD: Galloping towards the future


If you let your eyes wander once in a while, you will see a clear expansion of the reporting obligation on the horizon: the Corporate Sustainability Reporting Directive, CSRD for short. It replaces the NFRD, sets new standards for corporate sustainability reporting and also aims to create a binding framework for all EU member states.


The CSRD was approved at the end of November 2022 and entered into force on 05 January with binding effect. The national states now have 18 months to implement the new regulations.


CSRD in short


As part of a uniform EU standard for sustainability reporting, companies will in future have to publish precise information on the consequences of their business activities on human rights, the environment and social standards. The final drafts of the European Sustainability Reporting Standards (ESRS), which define the exact content of reporting, were submitted to the EU Commission on November 22.


Another new aspect is the expansion of the companies subject to reporting requirements:

  • From 2024 for all companies of public interest as well as companies that are already subject to the CSR Directive

  • From 2025 for large companies

  • From 2026 for listed SMEs

With the expansion of the reporting obligation, the number of reporting companies is estimated to increase from 11,600 to 49,000 across the EU. In doing so, the CSRD aims to, among other things:

  • Defining a sustainable business strategy and binding sustainability targets

  • Examining its own supply chain with regard to compliance with these targets

  • Accountability for resource use or presentation of business ethics, corporate culture as well as diversity policy.

  • Increasing transparency, and here a digital documentation as well as a comparability of the information to be disclosed.

In this way, the aim is to promote the transition to a sustainable and competitive economy in the spirit of the Green Deal.


It is pointless to mention that ignoring the CSRD reporting obligation will result in severe penalties.


What form of reporting obligation does the Supply Chain Sourcing Obligations Act required? 

The German LkSG, which comes into force in January 2023, requires not only significantly expanded risk management but also the implementation of measures against (potential) human rights violations. There must also be a complaints procedure. Furthermore, companies must record in an annual report which measures have been takenand that report be submitted to BAFA on a regular basis. For most companies with at least 3,000 employees, this report must be submitted for the first time by April 30, 2024 and will then be available for public inspection. 

Sustainability gains exponential weight


What our excursion into sustainability reporting makes clear is nothing other than a paradigm shift from "soft law" to "hard law", and thus also a shift from "reporting requirements" to mandatory "due diligence".


In view of the development over time, we should bear the following in mind: The term "sustainability" is really old. It was first formulated as a principle in German forestry in the 18th century. The first recorded thought on sustainability is said to have come from the Saxon chief miner Hans Carl von Carlowitz (1645-1714) from Freiberg in Saxony. In 1713, von Carlowitz published his work "Sylvicultura Oeconomica, oder Haußwirtschaftliche Nachricht und Naturgemäße Anweisung zur Wilden Baum-Zucht" ("Sylvicultura Oeconomica, or Economic Information and Natural Instructions for the Breeding of Wild Trees") and, in keeping with the mentality of a national economy, calls for a form of timber management in which only as much timber is felled as can grow back through reforestation. In this context, von Carlowitz speaks of "sustained use of the forests" and pleads for "... a cultivation of the wood that there is a continuous, steady and sustainable use."

The author is thus one of the first to recognize that the cultural asset "forest" cannot be saved by forestry alone, but only by the national economy as a whole. A credo that is more relevant today than ever.


As is so often the case, sustainability as a concept only reached the famous tipping point when it became necessary to measure it, to emphasize its public weight and to make its impact on the economy and society countable.


Screenshot der Deutschlandfunk Seite mit Schlagzeile zu Sustainability

Quelle: Deutschlandfunk


Today, an exponential curve is evident, driven by politics and society alike, both loudly and in the media.


From compulsion to opportunity


Let's not kid ourselves: Most companies will wait for regulations, laws and obligations. Some others, however, will act proactively - and thus in line with the spirit of the times. They will take the helm themselves, not wait for the next reporting obligation.


And the list of companies that proactively communicate their sustainability activities to the outside world grows longer every day. This is particularly evident in the website presentations where the various sustainability activities are reported on voluntarily and far from the official obligation, as here at Aldi, Apple, RWE and BASF:


Sustainability report Aldi Süd

Quelle: Aldi Süd

Sustainability report Apple

Quelle: Apple Nachhaltigkeitsbericht 2022

Sustainability report RWE

Quelle: RWE


Sustainability report BASF

Quelle: BASF


Active, voluntary communication of sustainability offers great opportunities. But legal requirements are one thing. The other is whether meeting legal requirements will be enough for companies.


And here we have a clear answer: No. "Outsourcing" sustainability to a communications department will no longer suffice; it will affect and influence the entire company. Speaking of communication, massive changes are currently knocking on the doors of corporate communication and marketing here as well. Let's make a start and approach the question of the new meaningful consumption and




Quellennachweise und zum Weiterlesen (Stand Februar 2023)


Nachhaltigkeit





Lieferkettensorgfaltspflichtengesetz (LkSG)


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Springer Gabler; 1. Aufl. 2022 Edition (7. Mai 2022)


BMAS Das Lieferkettensorgfaltspflichtengesetz


CSR in Deutschland - Das Lieferkettensorgfaltspflichtengesetz


Deutscher Bundestag verabschiedet Lieferkettensorgfaltspflichtengesetz


Deloitte: Lieferkettensorgfaltspflichtengesetz in der Praxis


Bayerischer Rundfunk: EU-Länder einigen sich grundsätzlich auf Lieferkettengesetz


Die Initiative Lieferkettengesetz: https://lieferkettengesetz.de


Absatzwirtschaft: Nachhaltigkeit in der Lieferkette: Zeit für Gerechtigkeit


Kreislaufwirtschaft


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Europäisches Parlament: Recht auf Reparatur: Für Produkte, die langlebiger und reparierbar sind


VDI: Zirkuläre Wertschöpfung. Werkstoffliches und chemisches Recycling von Kunststoffabfällen


Europäisches Parlament Ökodesign-Richtlinie: Steigerung der Energieeffizienz und Recyclingfähigkeit



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Recyclingnews: EU-Kommission will nachhaltige Produkte zur Norm machen


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Umweltbundesamt: Abfall- und Kreislaufwirtschaft


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Koalitionsvertrag ZWISCHEN SPD, BÜNDNIS 90/DIE GRÜNEN UND FDP: MEHR FORTSCHRITT WAGEN. BÜNDNIS FÜR FREIHEIT, GERECHTIGKEIT UND NACHHALTIGKEIT:


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brand eins Sonderausgabe Der neue grüne Deal Dezember 2020


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Bundeszentrale für politische Bildung: The European Green Deal:


DIHK: Worum geht es beim Green Deal?


Ökodesign-Richtlinie


EUR Lex (Originaltexte): On making sustainable products the norm


Umweltbundesamt: Ökodesign-Richtlinie


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Europäisches Parlament Ökodesign-Richtlinie: Steigerung der Energieeffizienz und Recyclingfähigkeit


Sustainable Development Goals (SDG)


BMZ: Die globalen Ziele für nachhaltige Entwicklung


IHK: Die UN Nachhaltigkeitsziele (SDGs) als Maßstab für verantwortungsvolles Unternehmertum


United Nations Global Compact: https://www.unglobalcompact.org


Recycling


BMUV: Kreislaufwirtschaftsgesetz


BMBF (Plastik): WErtschöpfungsketten gestalten



Stiftung zentrale Stelle Verpackungsregister: Mindeststandard recyclinggerechtes Design: https://www.verpackungsregister.org/stiftung-behoerde/mindeststandard-21/grundlegende-informationen


Europäisches Parlament: Recht auf Reparatur: Für Produkte, die langlebiger und reparierbar sind


VDI Zentrum Ressourceneffizienz: https://www.ressource-deutschland.de


Recyclingnews: EU-Kommission will nachhaltige Produkte zur Norm machen


Europäisches Parlament Ökodesign-Richtlinie: Steigerung der Energieeffizienz und Recyclingfähigkeit

ESG & Nachhaltigkeitsberichterstattung


Rat der Europäischen Union: Neue Vorschriften für die Nachhaltigkeitsberichterstattung von Unternehmen: vorläufige politische Einigung zwischen Rat und Europäischem Parlament


Regularien zum Greenwashing


BMUV Den ökologischen Wandel gestalten. Integriertes Umweltprogramm 2030.


Europäische Kommision: Unfair commercial practices directive


Europäische Kommision: Kreislaufwirtschaft: Kommission schlägt neue Verbraucherrechte vor und will Greenwashing verbieten


NKS / Bundesministerium für Bildung und Forschung: EU legt Vorschläge für nachhaltige Produkte vor


Digitaler Produktpass (DPP)

Digtler Produkpass

Europäisches Parlament Ökodesign-Richtlinie: Steigerung der Energieeffizienz und Recyclingfähigkeit


BMUV Der BMU Design-Sprint zum Digitalen Produktpass für die Elektromobilität


Umweltbundesamt Förderung des nachhaltigen Konsums durch digitale

Produktinformationen: Bestandsaufnahme und Handlungsempfehlungen


BDI Der „Digitale Produktpass“ auf dem Prüfstand


Recyclingnews: EU-Kommission will nachhaltige Produkte zur Norm machen


DKE Digitaler Produktpass: Förderung der Digitalisierung und Kreislaufwirtschaft durch standardisierte Daten


Europäische Kommission: Circular economy action plan (CEAP): https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en







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