Further development 2019
The Sustainability Code is a transparency standard which responds to current developments in the discussion surrounding sustainability. After two reporting cycles under the CSR Directive Implementation Act (CSR-RUG), it is prudent to complete a process of reflection to identify and utilise any potential for improvements and/or adjustments.
The two main approaches considered in the 2019 further development process were
• integrating the United Nations’ SDGs and
• defining the concept of materiality more precisely.
Following in the Code’s tradition, the opinions of both experts and the general public influenced the process of further development.
Procedure
A multi-stage process was completed to identify and utilise any potential for improvements and/or adjustments.
Firstly, hypotheses and positioning suggestions were developed based on a literature review and 18 interviews with Sustainability Code stakeholders.
In step two, these were discussed in an online public consultation. 37 comments by 24 authors were submitted online, while 109 stakeholders took part in an associated online survey.
In the third step, the outcome of this discussion was further consolidated in a dialogue with 23 stakeholders on 20 August 2019. Concrete recommendations were then derived for the further development of the Code.
“The future belongs to sector-specific KPI standards; they increase the usability of data and should add three sector-specific criteria to the 20 Code criteria.”
Dr Axel Hesse – SD-M
“As regards the CSR-RUG, the Code should quite consciously go beyond the legal requirements. After the initial hurdle of reporting for the first time, the Code can help to raise corporate awareness and address new issues.“
Prof. Dr Alexander Bassen – member of the Council for Sustainable Development (RNE)
“Integrating the SDGs could mean the Code offering greater guidance, which would also provide a line of approach for investors. However, it is important to ensure greater relevance with clear revenue limits, targets and KPIs.”
Silke Stremlau – Hannoversche Kassen
“It might be possible to align the Code completely with the SDGs. That would be the disruptive way to do it. That is risky too, of course, but if the access figures are currently on the low side and this approach could increase them because others would make greater use of them – for example because impact investors could then find the information they need there – it would be worth considering.”
Matthias Kannegiesser – sutainable natives
“There are two problems with the concept of materiality: the lack of understanding and the fact that it can enable circumvention. Companies use the concept to avoid reporting. The Code must bridge the gap between these two positions with its generalism.”
Birgit Riess – Bertelsmann Stiftung
“The advantage of reporting on the SDGs is that companies will develop an own awareness of being part of a global movement.”
Marlehn Thieme – Former Chairwoman of the Council for Sustainable Development (RNE)
“Reporting on the SDGs needn’t be perfect right from the start, but it could initially be seen as signalling transformation. Indicators can be added later on.”
Georg Schürmann – Triodos Bank
“The SDGs shouldn’t be misused as a marketing tool. They should be treated responsibly and honestly. It would be good if, for example, companies stated which SDG they have the greatest positive and negative impact on.”
Frank Jacob – Union Investment
“Although the SDGs are abstract and seemingly contradictory in some specific cases, they have gained an impressive level of significance with their prevalence. They represent an outstanding overarching communication platform. It would be negligent to ignore them.”
Jochen Raschke – IHK Nürnberg
Outcomes
Materiality
The Code sets out its concrete definition of materiality in the aspects under criterion 2. It is guided by the established notion of “double materiality” + the stakeholder perspective. With this approach, the Code will continue to take into account both the business-related perspective of the CSR Directive Implementation Act and a broader view encompassing the impact of business activities and the relevance of stakeholders’ interests.
The Code defines sustainability issues as material if they fall into one of the following categories:
(1)
Outside-in perspective: Sustainability issues which are associated with opportunities or risks for the course of business, the annual financial statements or the company’s situation (relevant for the firm).
(2)
Inside-out perspective: Sustainability issues which are affected by the company’s business activities, business relationships, or products and services – probably either positively or negatively (relevant for sustainability).
+
Stakeholder perspective: Sustainability issues which are defined as material by key stakeholders (relevant for stakeholders).
The revised version is published in the newly issued 2020 guide and on the website. The guide also contains details of the information used to conduct a materiality analysis based on the Code. For users, this change merely means that the existing specifications are set out in a better way. No additional aspects are required for the 2019 reporting cycle.
Changes made to the aspects of criterion 2: materiality
| Old |
New |
| Aspect 1 |
Describe the environmental, socio-economic and political specifics of the milieu in which your company operates. |
Aspect 1 |
Describe the environmental, socio-economic and political specifics of the milieu in which your company operates. |
| Aspect 2 |
Describe the positive and negative effects of your company’s business activities on the material sustainability aspects. |
Aspect 2 |
Explain which material sustainability topics are impacted by your business operations. State both the positive and negative impacts (inside-out perspective). |
| Aspect 3 |
Explain which material sustainability topics have an impact on your business operations. State both the positive and negative impacts (outside-in perspective). |
| Aspect 3 |
Describe the opportunities and risks resulting from your company’s handling of sustainability aspects and the conclusions which can be drawn from them for your company’s sustainability management. |
Aspect 4 |
Outline the opportunities and risks that your company is presented with as a result of tackling the above sustainability topics. State the conclusions you derive from this for your sustainability management |
SDGs
The requirements for reporting on the SDGs have not been changed in the Code as yet. Users still have the option of showing whether and how their sustainability targets relate to the SDGs in criterion 3 “Targets”. Furthermore, companies can still choose to explain the link to the SDGs in the criteria at a relevant section.
Within the process, opinions differed as to whether the SDGs should be integrated more heavily. This means that further consultation is needed to tease out and discuss meaningful links between the Code and the SDGs.
Outlook
Following the 2019 reporting cycle, information should be collected via a user survey about the way in which users apply the Code and which suggestions they may have.
In 2020, the survey should also establish how the companies perceived the rephrased criterion 2 “Materiality” and how helpful they found the additional information in the guide about completing a materiality analysis.
The issue of SDGs will be further examined in an analysis of opportunities and risks for the Code and discussed with stakeholders in subsequent consultation phases if applicable.
Changes implemented in 2020
The aspects of criterion 2, materiality, were revised in July 2020. The changes are now published in the database and on the website. In addition, the newly published Code guidelines (only available in German) have now included an extra chapter on the topic of materiality and materiality analysis. On July 15, 2020, the Code office also organized a webinar on the topic of materiality analysis, in which just over 200 people took part.