2024 will be an exciting year in terms of corporate sustainability. It will be the year of preparation for the upcoming Corporate Sustainability Reporting Directive (CSRD), which will result in a wave of sustainability reporting. In 2024, we will see the first ESRS statements from large, capital market-oriented companies before smaller and medium-sized companies are gradually required to disclose their ESG information.
ESG stands for Environment, Social and Governance and refers to the three main categories that play a role in the sustainable and responsible assessment of companies. For this reason, we have identified five key milestones in ESG management for SMEs that will be of great importance for sustainable success and will point the way forward for the economic well-being of SMEs.
Table of contents
- ESG milestone #1: Clear definition of responsibilities
- ESG milestone #2: Creating a sustainability strategy
- ESG milestone #3: Examining the supply chain
- ESG milestone #4: Perform test run of ESRS reporting
- Conclusion
1st ESG Milestone #1: Clear definition of responsibilities
A clear definition of where the sustainability function is located within the organization is of central importance. Which departments does it report to, does it report directly to the Executive Board or not?
Many CEOs and board members have now understood that corporate sustainability can only be successful if it is supported and communicated from the top management level.
The appointment of a specific person at board level, for example, not only demonstrates commitment to the ESG issue, but also serves as a representative statement to stakeholders.
2nd ESG milestone #2: Creating a sustainability strategy
Creating a stable basis for long-term sustainability and thus economic well-being requires a well thought-out strategy. Companies should define clear goals and choose the best tools to help them get there from the outset.
With the emergence of new reporting standards such as the ESRS, sustainability management and reporting will become mainstream and stakeholder awareness of ESG will steadily increase.
Sustainability is becoming increasingly established as a significant value driver. The EU taxonomy plays a central role here by setting clear criteria for determining sustainability. On the capital market in particular, it is regarded as a decisive benchmark by both companies and investors.
The overall aim is to steer more investment towards sustainable companies and technologies through these clear guidelines. In 2024, even greater attention will be paid to the assessment of financial markets and investors in connection with ESG criteria.
The development of a long-term sustainability strategy goes hand in hand with point 1, the recruitment of ESG-trained specialists. Finding and using suitable sustainability tools from the outset can be a great advantage here, as it prevents methodological changes and inconsistencies.
It is therefore high time to lay the foundations for long-term sustainability management and reporting now. The Code Gaia sustainability reporting software offers an effective solution, helping companies to significantly reduce the time and effort involved in sustainability reporting and management.
The software uses artificial intelligence to automatically extract data from accounting invoices and categorize it into environmental data. This eliminates the tedious process of manual data collection and saves time. In addition, all the necessary regulations are already integrated into the software, so no specific prior knowledge is required. Personal contacts are available throughout the entire process to support you with their expertise.
3rd ESG milestone #3: Examining the supply chain
Transparency along the supply chain is a key issue that should be at the top of companies’ agendas from next year.
With new laws such as the Supply Chain Duty of Care Act (LksG) and the European Sustainability Reporting Standards (ESRS), responsibility for the supply chain and business partners now also falls to the company itself. The law, which previously only applied to companies with 3,000 or more employees, will also apply to all companies with at least 1,000 employees from January 1, 2024.
A company’s own sustainability is no longer measured solely by its own actions; companies must now take a closer look at their own suppliers. The procurement of new information about suppliers and product/service users goes beyond purely financial information. In addition to financial aspects, ethical and ecological standards also play a role, for example.
Early dialog and information sharing with business partners is therefore crucial to ensure sustainable practices along the entire value chain.
4th ESG milestone #4: Perform test run of ESRS reporting
The increasing demand for sustainable products and services makes transparent communication of sustainability efforts to customers and stakeholders essential.
Even companies that are not yet legally obliged to report should take the opportunity to openly communicate their efforts in the area of sustainability. This not only serves to enhance their image, but is also an authentic expression of ethical management and is of interest to business partners and customers.
In addition, companies should use the remaining time until 2026 to familiarize themselves with and practice the ESRS reporting process before a full sustainability statement is required. They should actively engage with their auditors to clarify the initial aspects of the review of ESRS reports and determine whether an audit opinion will be issued and for what reason.
This makes it possible to obtain an up-to-date status and still have enough time to make any necessary adjustments. Trying out the ESRS early on also leads to smoother data collection, more accurate measurements and the chance to tackle unforeseen challenges.
If you are subject to the ESRS reporting obligation, we recommend that you start the analysis of double materiality sooner rather than later, ideally at the beginning of 2024.
By taking these measures into account, companies can give themselves a significant head start if they are obliged to report in the future.
5. conclusion
2024 will be a decisive year for corporate sustainability. SMEs must achieve the five key milestones in ESG management if they are not to be left behind.
In particular, the performance of a double materiality analysis as the basis of the ESRS should be tackled quickly and carried out correctly. Get access to our Code Gaia module for double materiality analysis now. This will support you in disclosing the analysis process and the results of the analysis.
The module provides a summary of the 4 core steps of a double materiality analysis:
- the commitment of interest groups/stakeholders,
- the identification and assessment of impacts,
- the identification and assessment of risks and opportunities
- and significant matters and topics.
