ESG: realised sustainability

The core issues of ESG are omnipresent, and the increasing significance is supported by the legislation. However, what this means in general and specifically for your business, is unclear more often than not. We clarify it for you. 

ESG – what does that mean?

The three letters represent different but colluding aspects of the sustainable management:
    E = Environment 
    S = Social 
    G = Governance 
The point is to develop sustainable and responsible strategies and business models as well as investment decisions out of these categories.  

Why has ESG become so critical? 

Due to the global and regional climate developments, springing into action got neccessary, and the EU has drafted the Green Deal. This is the strategy to be the first climate-neutral region, thus reducing the net emissions of greenhouse gases to zero until the year 2050. The according environment and energy goals until 2030 are: 
  • Cut down greenhouse gases by at least 55 % compared to 1990
  • Share of renewable energy in total energy consumption: at least 27 % 
  • Energy saving compared to the business as usual scenario: at least 30 % 
Until 2030, the EU makes more than a trillion EUR Green Investments into the energy infrastructure to support that Green Deal. 

What is the legal foundation? 

For controlling the investments into ecologically sustainable projects and business activities, the term "ecologically sustainable" must be clearly defined. This is done in the - controversial - EU taxonomy regulation 2020/852 (EU Tax Reg). It indicates which economic activities can be named ecologically sustainable (acc. to Art. 3). The six environmental objectives according to Art. 9 of EU Tax Reg. are: 
  1. climate change mitigation;
  2. climate change adaptation;
  3. the sustainable use and protection of water and marine resources;
  4. the transition to a circular economy;
  5. pollution prevention and control;
  6. the protection and restoration of biodiversity and ecosystems. 

To date, the environmental objectives 1 and 2 (climate objectives) are in force. The EU commission plans to put the environmental objectives 3 to 6 into force in 2023. 

Beyond the EU Tax Reg. and subordinate legislation of the EU commission, the following regulations are effective for climate-ready reporting: 
  • CSRD – Corporate sustainability reporting directive, the EU directive for sustainability reporting (enacted 05 January 2023)  is implemented in Austria with the "NaBeG" (until mid 2024). 
  • ESRS – European Sustainability Reporting Standards, the passage of the European standards for sustainability reporting of the European Financial Reporting Advisory Group, based on the CSRD (still in progress. First set of ESRS standards (sector neutral) is realised, second set of ESRS standards with separate standard for SMEs (sector related) in review status, realised until June 2024) 
  • CSDD – Corporate Sustainability Due Diligence Directive, for laying down sustainable and responsible action in companies (expected for 2024).  

What are ecologically sustainable economic activities?

In article 3 of the EU Tax Reg. a few basic points are defined which economic business activities can be classified as ecologically sustainable (taxonomy aligned, according to NACE code): 
  • The activities must substantially contribute to one or more environmental objectives. 
  • No other environmental objective may be significantly harmed thereby. 
  • The social minimum standards such as the principles of the OECD guidelines for multinational enterprises, the governing principles of the United Nations for economy and human rights including the statement of the ILO (International Labour Organisation) and the international charta of the human rights must be adhered to (comply with minimum safeguards).

Are you affected by the regulations of sustainability reporting? 

You have to deal with it if you are among the following enterprises:
  • Enterprise with office in the EU  
    • All big enterprises where two or threee out of the three criteria are met (big corporations according to § 221 (3) UGB)
      • > 250 employees
      • > 40 Mio. EUR turnover
      • > 20 Mio. EUR total assets
    • Listed enterprises
  • Enterprise with office outside of the EU
    • group turnover in the EU > 150 Mio. EUR and 
    • at least one EU subsidiary  (large or listed) or
    • an EU subsidiary (> 40 Mio. EUR turnover in the EU)

When are sustainability reporting to be done?

The following fiscal years are the first ones for applying CSRD:
  • From 01st January, 2024 big PIEs/public interest companies, that report already accordign to NaDiVeG (first statutory reporting requirement 2025 for 2024).
  • From 01st January, 2025 all big corporations, medium-sized enterprises (first statutory reporting requirement 2026 for 2025)
  • From 01st January, 2026 listed SMEs with transitional provisions
  • From 01st January, 2028 non-EU-enterprises (see above)

What does the sustainability reporting contain and how should it be conducted? 

In article 8 of the EU Tax regulations, the reporting requirements are defined. The reporting of ecologically sustainable economic activities and liaisons to the three KPIs are taxonomy indication relating to revenues, CapEx and OpEx. The disclosure regulations tells the content and the presentation of the neccessary data:
  • the share of revenues affiliated with products or services of ecologically sustainable business activities according to art. 3 and art. 9 and 
  • the share of CapEx and, if applicable, the share of the OpEx affiliated with assets or processes of ecologically sustainable business activities according to art. 3 and art. 9 and 
    The reporting is part of the management report, to be elaborated as a separate chapter and then disclosed. 
The reporting is part of the management report, to be elaborated as a separate chapter and then disclosed.

Is it reqired to audit the sustainability reporting via an independent third party?

The audit of the sustainability reporting has to be carried out in order to ensure reporting without greenwashing. There, the limited assurance and the nonfinancial reporting are compulsory. In future, an audit with reasonable assurance is also planned. 

The regular registered auditors must examine the sustainability reporting. There is a member state option to admit also a different registered auditor or alternative assurance services for this audit. Then, the enterprises can also appoint a different auditor. 

ESG reporting with Moore Salzburg 

We integrate the future business experts into this significant topic: Together with students of the university of applied sciences Salzburg, hands-on guidelines for implementing ESG reporting were elaborated. It comprises the regulatory and legal framework, also considering the situation of medium-sized enterprises.  

This new reporting matter is not a simple one; it has to be approached in a qualified and systematic way. We accompany you on your path to the climate-related reporting. 
Contact us!