Following ratification by the German Bundestag in March 2017 of the “Act to strengthen non-financial reporting by companies in their management and group management reports”, the Code was amended and adapted in accordance with the statutory requirements that have now been laid out. Passages relating to specific criteria as well as explanations and checklists were revised with a view to providing companies affected by the reporting obligation with concrete guidance on compliance.
Requirements of the German CSR Directive Implementation Act
From financial year 2017 on, fundamental changes to the reporting requirements for numerous major companies will apply: they must provide data on environmental, social and labour aspects of their operations as well as on respecting human rights and fighting corruption. However, small and medium-sized enterprises, too, are advised to more strongly consider documenting their non-financial performance – for instance if they maintain business relationships with companies to which the reporting obligation applies and require information on sustainability performance from their suppliers.
Current review of legal conformity
In the past, reporting in accordance with the Sustainability Code already ensured compliance with the non-financial aspects named by the EU. This was confirmed in 2015 in an expert legal opinion as well as via a comparison as regards content between the requirements of the EU and the Code. An actual legal review of compliance with the German CSR Directive Implementation Act confirmed in May 2017 that all aspects named in the Act are covered in full by reporting in accordance with the Sustainability Code.
In particular, criteria 1 and 2 were more clearly differentiated from one another with respect to their requirements, and the term “materiality” was more concretely formulated in line with the definition laid out in the EU Directive and the Implementation Act. In addition, the “four-pronged approach” stipulated by the Act for describing individual issues – policies, results of the policies, risks, indicators – was taken up in the review process. New structural levels and terminology clarify correspondence with the Act. Furthermore, the performance indicators were updated to correspond with the new Sustainability Reporting Standards of the Global Reporting Initiative (GRI SRS). No other structural changes were made.
Thanks to the clarifications implemented, the Sustainability Code now clearly describes minimum standards for non-financial disclosures in accordance with the CSR reporting obligation. The German federal government also names the Code in its preamble to the Act as a suitable guidance on reporting obligation compliance.
The Sustainability Code – a single-source tool for both reporting and management
“Generally speaking, application of a reporting framework is indispensable in preparing reporting in order to generate comparable data that is suited to assessing the impact and quality of sustainability management,” emphasises Marlehn Thieme, Chair of the German Council for Sustainable Development. “With the Sustainability Code, the German Council for Sustainable Development has given companies and organisations a purposefully low entry-barrier tool that will aid them in providing pragmatically oriented information on all aspects comprised in the reporting obligation and describing their ambitions.” In general, the Act does not prescribe application of any specific standard for fulfilling the reporting obligation. The Act does stipulate, however, that an explanation must be given if no reporting framework has been applied at all.
Comprehensive assistance offering
Companies wishing to publish a declaration of conformity with the Code also benefit from more than the Sustainability Code’s straightforward application. The database is also free of charge, easy to use and provides tips and checklists covering the required content as well as a universal interface for sustainability reporting software solutions that enables automated data transfer. Moreover, numerous informational materials have been made available, and the network of training partners offers informational events and training seminars as well as individualised advisory services.
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