ESG Consulting and Management
Environmental, Social, Governance – ESG – stands for a holistic business practice that measures and evaluates not only economic parameters, but also the effects of economic activity on the environment, on society, and on corporate management. In this way, ESG minimizes future risks and creates incentives for successful long-term sustainable strategies. Drees & Sommer is guided by the ESG regulations and helps customers introduce and comply with them.
WHAT DOES ESG STAND FOR?
The three letters ESG stand for "Environmental, Social, Governance." They refer to a way of doing business that, in addition to economic success, aims to improve the areas of Environment, Social issues, and Corporate Governance. By adhering to ESG principles, industry and financial products are created in the market that are focused on sustainability.
As part of the EU Green Deal, the requirements for business models and products, as well as for sustainable reporting, are defined. The goal is to see this as an opportunity for a sustainably designed future — and to align entrepreneurial actions accordingly. So far, stakeholders have primarily subjected economic categories to a systematic assessment of opportunities and risks. These included, for example, capital resources or the market value of companies. However, sustainability with ESG principles is already coming into focus.
aims the EU to be the first climate-neutral continent.
Euro should be mobilized by the investment plan for the EU Green Deal by 2030.
of European investors consider ESG factors in their investment approach.
WHY IS ESG RELEVANT TO YOUR COMPANY?
- Increasingly, sustainability criteria are seen as an entrepreneurial duty and not simply an option.
- Keyword ‘divestment’: Investors and stakeholders evaluate their investments according to ESG criteria. Fulfillment of these criteria offers opportunities today, whereas non-fulfillment represents a future financial risk.
- Your customers and business partners expect transparency and disclosure, added to which the demand for genuinely environmentally and socially responsible products is steadily increasing.
- Buildings and infrastructure have the largest ecological footprint. From an investor’s point of view, real estate, as a long-term asset class, is particularly exposed to the risk of high loss of value – with the risk of turning into stranded assets.
- Sustainable business models will dominate the market in the medium to long term, so a sustainability strategy with clear objectives will give you a decisive competitive edge.
WHAT ESG STRATEGY ARE YOU PURSUING?
Compliance-oriented
As a result of the Paris Climate Agreement and the EU Green Deal, numerous, sometimes complex and far-reaching regulations have emerged for various market participants. In order to remain legally compliant in the future and meet the ESG criteria required by the EU, it is important to maintain an overview of the sustainability systems. It is also about dealing with sustainability risks and being able to act with suitable tools and strategies. We can support you in these areas.
Future-oriented
Sustainable corporate development requires adapted or completely new business models. But it also opens up huge opportunities. Our future-oriented consulting undertakes a 360-degree view with you and supports you on your way to becoming a successful sustainability pioneer – with measures ranging from a Quick Check to developing and implementing an appropriate strategy and reporting.
Whether you want to establish legally compliant reporting or to establish your company as a sustainable pioneer in your sector, we can offer a custom-fit solution.
WHICH SECTOR DOES YOUR COMPANY BELONG TO?
The following sectors of the EU taxonomy represent the economic activities that are responsible for 80 percent of carbon emissions under the classification system
The building sector is the largest energy consumer in the EU. It is responsible for about 40 percent of energy consumption and 36 percent of carbon emissions. How can the construction sector get onto a path to zero emissions?
The transport sector accounts for one third of the EU’s total energy consumption – the bulk of it from fossil fuels, particularly oil – and accounts for over 25 percent of carbon emissions. How can mobility become emission-free and climate-friendly in the future?
The manufacturing sector ranks second in terms of carbon emissions. What contribution can it make to achieving the goal of a circular economy?
The energy sector accounts for over 25 percent of greenhouse gas emissions and is the backbone of the other sectors. How can the energy transition get on the ‘path to zero’?
The Green Deal aims to redirect capital flows towards investment in sustainability as the only way to overcome the climate crisis. The resulting EU Disclosure Regulation requires financial market participants to disclose information on the sustainability of their investment decisions. How can the highly dynamic financial sector meet this requirement and get fit for the future?
Digitization offers enormous potential to facilitate the EU’s transition to a low-carbon circular economy. The key role of the technology sector as an enabler has not been fully exploited to date. The sector offers a broad range of target areas – from the energy requirements of cloud services and highly globalized supply chains to the use of critical raw materials in chip production.
WHAT IS THE PATH TO 2050?
Where does Path 2050 lead? You can read here about currently applicable directives and regulations – and the requirements you will face in the future.
WHICH DIRECTIVES AND LEGISLATION APPLY TO YOU?
The following provides an overview of the key ESG regulations:
CSRD (Corporate Sustainability Reporting Directive - disclosure requirements for non-financial market participants)
EU taxonomy
SFDR (Sustainable Finance Disclosure Regulation - disclosure regulation for financial market participants)
CSRD
The Corporate Sustainability Reporting Directive (CSRD) is a major update of the EU Non-Financial Reporting Directive (NFRD). The intention is to make sustainability an integral part of reporting and for it to be gradually treated on a par with financial topics.
The central instrument of the CSRD is the double materiality analysis, in which sustainability aspects are considered from two perspectives. On the one hand, as part of the impact assessment, companies must examine what effects their business activities have or could have on society and the environment. On the other hand, the extent to which sustainability aspects such as climate change could have a financial impact on companies must be analyzed. Companies must report annually on the issues identified as material in accordance with the requirements of the European Sustainability Reporting Standard (ESRS).
The CSRD currently applies to companies that meet at least two of the following three criteria: more than 250 employees, more than 40 million euros in turnover or more than 20 million euros in total assets. Listed companies must also disclose sustainability-related information regardless of their size. Non-European companies that exceed certain turnover thresholds in the EU are also obliged to meet the requirements.
In February 2025, the EU Commission presented a new package to simplify sustainability reporting. If adopted by the European Parliament, the group of reporting companies could be restricted in future. A corresponding amendment to the law is planned for 2025.
Since January 2025, all companies that were already required to report in accordance with the Non-Financial Reporting Directive (NFRD) have been subject to the requirements of the CSRD for the 2024 financial year. Companies that exceed the thresholds set by the EU must report for the 2025 financial year from January 1, 2026; listed small and medium-sized enterprises (SMEs) that do not meet the thresholds must report for 2026 from 2027.
If the package presented by the EU in February 2025 to simplify sustainability reporting is adopted, the reporting obligation for companies subject to reporting requirements from 2026/2027 could be postponed by two years.
EU-Taxonomy
The EU taxonomy is a standardized classification system for environmentally sustainable economic activities. The regulation defines criteria that companies can use to measure and evaluate their activities in terms of environmental sustainability.
The EU taxonomy applies to all key market and economic players across all industries and sectors.
As part of the reporting obligation, the EU Taxonomy Regulation primarily affects large companies in addition to financial market participants such as banks and insurance companies. In future, it will also apply to capital market-oriented small and medium-sized enterprises (SMEs) that are subject to the Corporate Sustainability Reporting Directive (CSRD).
In addition, the EU taxonomy also affects institutions and EU member states.
Since 2022, all financial market participants have had to report annually via the Sustainable Finance Disclosure Regulation (SFDR).
The CSRD, on the other hand, sets out the reporting obligations for non-financial market participants, who must also report in accordance with the EU taxonomy. Large, listed companies are required to report from 2025 (for the 2024 financial year). The second wave with large companies (> 500 employees) is planned from 2026 (for the 2025 financial year).
Similar to the CSRD, the package presented by the EU in February 2025 to simplify sustainability reporting could reduce the number of companies subject to reporting requirements and postpone the deadline by two years.
SFDR
The Sustainable Finance Disclosure Regulation (SFDR) is an EU regulation on the publication of information provided by financial market participants on the sustainability of their investment decisions. It contains numerous transparency regulations at product and entity level as well as disclosure obligations for financial service providers with regard to their consideration of sustainability issues.
The SFDR differentiates according to whether a financial product merely takes sustainability risks into account (Article 6, SFDR), has or promotes sustainable characteristics (Article 8, SFDR – ‘light green’), or is a product with a clear sustainable investment objective (Article 9, SFDR – ‘dark green’).
The SFDR is aimed at financial market participants as well as financial advisors. Accordingly, financial advisors also include insurance intermediaries, insurance companies, credit institutions and AIFM/OGAW management companies providing investment advice.
The SFDR emerged from the action plan for financing sustainable growth, which was initiated by the European Commission in March 2018. The annual reporting obligation came into force on March 10, 2021.
How do we implement ESG?
On the way to becoming Beneficial Company
WHAT ARE THE KEY TERMS?
Environmental, Social, Governance – ESG – stands for a holistic business practice that, in addition to economic parameters, measures and evaluates the effects of economic activity on the environment, on society, and on corporate management. In this way, ESG minimizes future risks and creates incentives for successful long-term strategies. Drees & Sommer is guided by the ESG regulations and helps customers introduce and comply with them.
The EU Green Deal presented by the European Union at the end of 2019 aims to make Europe the first climate-neutral continent by 2050. This requires measures such as the expansion of renewable energies, energy efficiency, sustainable production and strict environmental regulations. It affects companies, public institutions and citizens alike, as all sectors must contribute to reducing emissions and protecting the environment.
The EU taxonomy is a standardized classification system for assessing the environmental and social impact of economic activities. This allows every company to measure and evaluate its ‘ecological and social impact’ against binding criteria and to minimize this impact over time.
The EU taxonomy already plays a significant role – especially for the financing of real estate projects, as in the case of Green Bonds – as it allows investors to identify sustainable projects and assets and better assess risks. In this context, the EU taxonomy is also intended to direct capital flows towards more sustainable investments.
The EU taxonomy has been developed as a result of the Paris Climate Agreement of 2015 and the subsequent EU Green Deal, both of which aim to limit global warming to no more than 1.5 degrees Celsius.
In its broadest sense, the term refers to a financial system that leverages investment to promote and control the transformation to a sustainable economy and society. More narrowly, it refers to individual financial products that aim to achieve social and ecological goals.
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