Sustainability reporting and sustainability auditing

Make soft factors tangible. This is how you achieve robust metrics.

Your expert for questions

Nicolette Behncke
Partner, Sustainability Services at PwC Germany
Tel.: +49 171 764 0004

From pure compliance through to value-oriented management and stakeholder communications

Current events are transforming the way we live and do business. With the rise of the issue of sustainability, companies need to adapt or completely redesign their business models if they want to ensure long-term value creation. However, the management methods available and the language used to describe business performance are outdated – and heavily influenced by conventions from the world of finance. A holistic approach is needed in order to make organisations fit for increasingly uncertain times. PwC’s sustainability experts can help you to integrate sustainability information and value drivers into your core management tools and your approach to external reporting. 

Global megatrends like climate change, technological transformation and the Covid-19 pandemic are causing far-reaching changes – and the impact of these changes can be seen in the rising value of intangible assets for a company's market valuation. In the last 25 years, the value of intangible assets has risen continuously. Today, intangible assets account for more than 80% of a company’s value. In the 1970s, by comparison, they accounted for just 20%.

"Today, a purely finance-oriented management approach is no longer sufficient for managing the non-financial factors that drive value. This is also mirrored by a transformation in external reporting. The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) associated with it will require a new form of reporting that places a stronger focus on reflecting society’s interests. This is also the way to give stakeholders a credible and comprehensive picture of a company."

Nicolette Behncke,Partner, Sustainability Services, PwC Germany

Sustainability reporting at a glance

Reporting about sustainability-related topics is not a new invention – regulators and investors see it as a recognised practice that has matured over many years. Investors are demanding increasing amounts of information in order to assess the adaptability and future-readiness of companies, and the Corporate Sustainability Reporting Directive (CSRD) has now added these demands to the list of rules for compliant reporting. Supervisory boards are including these topics in their approaches to ensuring effective corporate supervision.

Sustainability reporting ensures a company’s compliance with the Directive (CSRD) and standards (ESRS), and also provides a platform for companies to shape their public image. More importantly, however, sustainability reporting is a tool for holistic corporate management and reporting. Effective sustainability reporting focuses on providing the right sustainability-related information to high standards and in a timely manner in order to enable fast decision-making and allow communication with market participants at all times. Auditing this information – as has been standard practice for financial reporting for many decades – will be mandatory from 2024, and will increase the credibility of sustainability reports for internal and external stakeholders.

What are the advantages?

Our services: How we can help you on your journey

We can support you in setting your level of ambition for reporting.

We can help you to break down your strategy into relevant KPIs.

We can help you to improve the quality of sustainability-related information.

We can help you integrate sustainability-related information into key decision-making processes.

We can help you to understand the reporting requirements that are relevant to you.

We can help you to generate sustainability-related information.

We offer assurance services for all manner of sustainability-related information.

Auditing sustainability-related information is becoming increasingly relevant for decision-making processes in other areas, too.

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Building trust with sustainability reporting

It is vitally important for companies to build trust with their stakeholders – particularly in times of crisis. Trust is built through action, and also through communication about this action. Market participants expect full transparency and want to be kept in the loop at all times. Reliable information is absolutely essential for creating the necessary level of trust. Doing appropriate due diligence on a company’s non-financial data and information and conducting an external audit can form the basis for this level of trust.

It is only possible for a company to make well-informed decisions and communicate openly with stakeholders if it has a holistic understanding of its performance and how it creates value. This requires an effective management and reporting system that focuses on the relevant factors that influence the company’s value creation process. If decisions are also made based on non-financial information, the quality of this information should not be any lower than for financial indicators: it should be integrated into established, standardised financial reporting processes.

Holistic management and reporting create credibility and trust from the market – and also securesthat sustainability is embedded into all areas of the company. This ensures that sustainability is treated as a core element of modern corporate management in line with its importance, rather than being viewed as a marginal issue.

Your situation: How to establish an effective non-financial management and reporting system

1. What statutory requirements must I comply with? Which reporting standards are relevant?

The requirements and reporting standards for sustainability reports will undergo considerable change in the near future with the introduction of the CSRD. Meeting these requirements is a significant challenge for companies. Companies that already report in line with the Non-financial Reporting Directive (NFRD) will be obliged to report in line with the CSRD from the 2024 reporting period. This will be rolled out to companies classified as large businesses for the 2025 reporting year, and to publicly traded small and medium-sized enterprises (SMEs) in 2026 (or 2028 if they take up the option for a two-year transition period).

Many companies are already using several voluntary standards, including those for the Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD), the United Nations Sustainable Development Goals (SDGs), the Principles for Responsible Investment (PRI) and the German Sustainability Code (Deutscher Nachhaltigkeitskodex, or DNK). The challenge for companies is how to roll out a reporting system that will add value while also facilitating compliance with the new requirements under the CSRD.

2. How do I select the right non-financial indicators?

Holistic management and reporting can turn sustainability into much more than just a “nice-to-have” by making sure it is addressed in all management-related areas of the organisation, gradually making it an integral part of the company’s DNA.

The double materiality analysis required by the CSRD facilitates a first step in this direction. This analysis can be used to work out which quantitative and qualitative ESRSreporting obligations the company has some control over, and identify obligations which pose financial risks or opportunities for the company’s activities.

3. How can the data quality of sustainability indicators be improved?

An effective internal control system (ICS) for sustainability-related KPIs is vitally important in order to generate reliable sustainability data for effective decision-making and to strengthen stakeholder trust. Standard definitions for KPIs, automated and standardised processes, and formalised and effective controls are fundamental to obtaining accurate and comprehensive sustainability data.

4. How can I develop an integrated dashboard?

An integrated dashboard gives a company a solid overview of the value creation process. It shows how stakeholder expectations are integrated into its strategy and provides insights into risks and opportunities. In essence, it highlights the KPIs that are necessary for the company to manage progress towards achieving its goals.

5. How can external assurance verify the reliability of the data?

In general, reporting processes for sustainability data are currently less mature than those for financial reporting. External assurance helps to ensure the reliability of the data and can assist the supervisory board in doing its job. In addition, external assurance can identify gaps in the reporting process and controls, which enables further improvements to the company’s approach to sustainability reporting. External assurance will be mandatory for companies required to report in line with the CSRD.

The aim: Making sustainability an integral part of your company’s DNA

Holistic management and reporting can turn sustainability into much more than just a “nice-to-have” by making sure it is addressed in all management-related areas of the organisation, gradually making it an integral part of the company’s DNA.

Our promise

You can count on us

Integration: The biggest challenge is to bring together employees from different areas of your company. Our team will help you to connect your business units by bringing the different perspectives together to form a coherent storyline.

Continuation: You don’t need to reinvent the wheel. We will build on what you have already established and will provide our expertise wherever it is needed.

Experience: We have in-depth expertise, and will help you to safely and efficiently navigate the jungle of regulations and non-financial reporting standards.

On the pulse of time: We support the process of developing standards, and work closely with policymakers and other interest groups. You can benefit from our in-depth knowledge of current and future requirements for sustainability reporting and assurance.

Value-adding: We can help you to achieve a transparent overview of the value-adding factors for your company.

Embedding Sustainability

We can advise you on implementing all types of sustainability-related areas, including the EU Taxonomy. This regulation applies to all non-financial statements or separate non-financial reports published from 1 January 2022 onwards.

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Additional insights on sustainability reporting and sustainability auditing

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WP Nicolette Behncke

WP Nicolette Behncke

Partnerin, Sustainability Reporting Leader Europe, Sustainability Services, PwC Germany

Hendrik Fink

Hendrik Fink

Partner, Sustainability Services, PwC Germany

Theres Schäfer

Theres Schäfer

Partnerin, Sustainability Services, PwC Germany

Tel.: +49 175 588 8389