Sustainability reporting in accordance with the European Corporate Sustainability Reporting Directive went live at the turn of the year. As a first step, large listed companies must comply with the obligation to disclose extensive non-financial key figures, with other companies to follow in the coming years. The directive affects 50,000 companies in the EU, 15,000 in Germany alone. It heralds a new era in accounting.

Many large German companies have been submitting sustainability reports for several years now and are no strangers to the topic. Nevertheless, the implementation of CSRD is also a feat of strength for them because the new requirements are much more extensive and go into considerable detail: "We are affected by everything," is what being heard from large companies with regard to the number of relevant regulations. Suddenly, a mass of standardised data often has to be queried and assessed in hundreds of subsidiaries worldwide to arrive at an overall ESG picture. The reporting also has to be harmonised with a large group of stakeholders. Many companies have to define the field even more broadly than required by regulation to present the portfolio's sustainability in its entirety. In practice, for example, there are complaints that positive ESG contributions go beyond climate targets, which cannot always be presented using the requirements of the EU taxonomy. Ultimately, however, the aim is to ensure transparency and comparability regarding sustainability, regardless of regulation.

The learning curve is steep, as the European standards for ESG reporting were developed in record time. Unlike the introduction of international financial reporting in the past, the lead time was extremely short, and for many, it was a leap in the dark. Companies were forced to quickly set up large new reporting departments, adapt processes, initiate the merging of financial and non-financial reporting and steer sustainability reporting in the direction of corporate finance.

To make matters worse, efforts to establish new key performance indicators and metrics are taking place within a regulatory framework that is anything but mature and consistent. Some companies are realising that not all of their economic activities are reflected in the European standards. The question of global standardisation of ESG reporting looms large. It remains to be seen to what extent the European sustainability standards will become part of international regulation. Nevertheless, the standard setters appear to have a strong desire for harmonisation.

Users are faced with the challenge of the newly introduced so-called double materiality, which forces companies to assess not only external ESG impacts on their value creation, but also the material impacts of their business on the economy, environment and society. In particular, the view from within the company is seen as a challenge in terms of reliable analyses – especially when it comes to estimating possible future impacts. Standards still need to be developed here.

On a positive note, it must be recognised that despite all the lamentations during the regulatory process, the prevailing opinion is now that sustainability reporting is a good thing. Some company representatives even describe the EU taxonomy as a "cool concept". If there is no getting around the issue and regulation is designed to be permanent, the aim is to give it a positive spin and not leave it at reporting exercises.

Even if there is less euphoria, there is a growing realisation that the new reporting instruments provide companies with a tool that motivates performance through transparency and promotes the necessary transformation of companies. However, this realisation is also likely to be driven by the fact that various stakeholders will continue to exert pressure.