Sustainability – responsibility in society and competitive advantage
Sustainability: a strategic tool of corporate management
Sustainable entrepreneurial activity will play a key role for many years if we are to succeed in combining economic progress and the environment with social balance. Companies bear a particular responsibility here – for example, with resource-efficient production, the production of environmentally friendly products, technological innovations and socially responsible practices. Companies thus make a decisive contribution to sustainable social development. Sustainable business practices are now a prerequisite for a sustainable society with social, environmental and economic objectives. In addition, companies that comply with these aspects of corporate governance benefit from a key competitive advantage. Sustainable business practices and reporting are thus increasingly becoming a strategic tool for business management.
To allow this competitive advantage to arise and leverage it to the benefit of company development, companies report on the sustainability performance of the company in the (group) management report or in a separate sustainability report. They thus inform internal and external stakeholders, such as shareholders, analysts, customers, employees, government organisations, NGOs, suppliers and the general public. With this information, companies can increase their perception as well-governed organisations that maintain and strengthen their market capitalisation, be viewed as attractive employers in a competitive environment, realise acquisition benefits and much more.
Existing national reporting standards
The German Commercial Code already contains regulations for reporting on sustainability in the (group) management report. Based on it, large corporations or commercial partnerships are obliged to report on non-financial performance indicators in their analysis of the financial performance and position of the company or group. This includes information on environmental and employee-related matters where these are important to understanding the financial performance and position of the company or the group. On top of this, aspects of sustainability that have a significant effect on the future development of the company or group must be assessed and explained with their material opportunities and risks. Furthermore, publicly traded companies are expected to provide additional information in the statement on corporate governance if management has voluntarily committed to aligning corporate governance with the objectives of sustainable development.
The ongoing development in reporting on sustainability issues is visible, among other things in the form of increased requirements based on CSR-Directive-Implementation Act compared with currently applicable reporting obligations in the scope of the (group) management report. These requirements envisage an extension of non-financial information reporting obligations for large public-interest entities with an average of more than 500 workers. Based on this, these companies must adopt into the (group) management report a non-financial statement with details of environmental, social and labour issues, how human rights are respected and how corruption and bribery are combated. However, this information can also be published in a separate sustainability report, provided that this is published on the company’s website either along with the (group) management report, or no later than four months after the balance sheet key date, and referenced in the (group) management report. These additional disclosure requirements in national law become effective as of 1 January 2017.
Benefits of an external audit
An external audit of the sustainability report gives an important boost to the credibility of the report, helping to uphold or establish the enterprise’s reputation and improve communication with stakeholders. Further advantages of an external audit may result from proposals relating to modelling internal processes, suggestions on potential improvements in sustainability management and recommendations for anchoring sustainability in corporate governance.
Our experts are happy to support you in the scope of setting out your sustainability report or with issues regarding non-financial statements, or by performing an auditor’s review or audit of your sustainability report.