Sustainability reporting - challenges for medium-sized companies

Which challenges and advantages sustainability reporting holds in store for medium-sized companies

Sustainability reporting for medium-sized companies

Author: House of Eden

  • EU calls for statutory sustainability reporting
  • Small and medium-sized businesses are overshadowed by other challenges
  • Sustainability reporting puts medium-sized companies under pressure

At the beginning of this year, the EU regulation on corporate sustainability reporting (Corporate Sustainability Reporting Directive, in short: CSRD) came into force. In addition to the reporting obligation for companies with a special public interest that has been in force since 2014, this regulation is now being expanded. This affects around 50.000 companies across the EU. This is usually less of a problem for large companies, but the situation is very different for medium-sized companies.

Sustainability reporting and its advantages

Sustainability reporting or sustainability reports contain comprehensive information about the behavior of companies in the areas of environment, social affairs and governance. Specifically, the reports provide an overview of the most important climate goals of companies, their key performance indicators as well as their standards and sustainability guidelines. In addition, sustainability reports contain information on specific initiatives and measures. For example, in the areas of diversity and inclusion, employee satisfaction or for reducing emissions from companies.

The benefit of regular sustainability reporting is therefore to present the efforts of companies to improve sustainability, working conditions and employee satisfaction. On the one hand, this makes it a helpful tool for monitoring and evaluating companies, and on the other hand, it creates incentives for companies to make more efforts in these areas and to gain the trust of investors, consumers or partners.

Medium-sized companies voluntarily put little focus on sustainability

Medium-sized companies are currently facing various challenges: according to one, the most urgent are Study by PwC the energy crisis and the shortage of skilled workers. The transformation into a sustainable company often has a lower priority. Medium-sized companies also see raw material prices and secure supply chains as more important factors than a sustainable economy. In these companies, the issue of sustainability is primarily driven from outside. Only a third of the medium-sized companies surveyed work sustainably of their own accord.

The PwC study "ESG Strategy and Reporting: Opportunities and Challenges for German SMEs" surveyed almost 160 medium-sized companies from the manufacturing sector together with the Institute for Management and Innovation (IMI) at the Ludwigshafen University of Economics and Society. A key result: The companies have recognized that they have to tackle sustainable transformation, but are not pursuing a holistic strategy and are not yet able to meet the legal requirements.

What challenge does sustainability reporting pose for SMEs?

Sustainability reporting turns the priorities of medium-sized companies upside down. More than 70% of the companies surveyed feel overwhelmed by this new challenge. The difficulties are mainly of a bureaucratic nature. For example, in data collection and its quality, processing and analysis. According to PwC, this is mainly due to the fact that medium-sized companies have neglected the topic of digitization in recent years.

Many medium-sized companies are also concerned about the issue of greenwashing. Many fear that they will not be able to adequately cope with the enormous bureaucratic effort. On the other hand, the companies that take on this task have great advantages over the competition. In this way, social acceptance leads to a better competitive position and ultimately to a trustworthy brand.

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