ESG guidelines
The most important standards at a glance
Companies are faced with the challenge of coping with a plethora of ESG guidelines that determine their approach to sustainability. Whether CSRD, ESRS, ISO standards or the EU taxonomy - the variety is huge. We will introduce you to the essential ESG guidelines that are crucial for your company. What are the differences and why are ESG guidelines so important for companies?
Why are there so many ESG guidelines?
The numerous ESG guidelines are the result of political efforts to promote sustainable business practices . Political pressure increased with the EU Sustainable Growth Strategy, which aims to establish sustainable financial practices and steer investments towards green technologies. The European Green Deal of 2019, which aims to make Europe climate-neutral by 2050, reinforced the need for clear and binding ESG guidelines.
The aim of the ESG guidelines is to provide companies with strategic and operational support in integrating sustainability into their business strategy.
Everything at a glance: The most important ESG guidelines and their differences
The Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) is the largest European reform of non-financial reporting and replaces the Non-Financial Reporting Directive (NFRD).
This ESG directive creates a standardized framework for reporting sustainability data and will be a mandatory part of the management report in future. Like the financial report, the sustainability report must be audited by an auditor .
The CSRD applies to companies that fulfill two of the following three criteria:
The CSRD applies:
Even non-reporting SMEs can be indirectly affected by this ESG directive if they have to provide information to reporting business partners.
In Germany, it is estimated that 15,000 companies are affected, and around 50,000 reporting companies across Europe. This makes the CSRD one of the most important ESG directives of our time.
Free guide: How to implement the CSRD step-by-step
The European Sustainability Reporting Standards (ESRS)
The ESG guidelines of the European Sustainability Reporting Standards (ESRS) define the precise requirements of the CSRD for reporting in the areas of environmental, social and governance (ESG). The aim is to ensure standardized and transparent reporting for companies.
The ESRS were developed by the European Financial Advisory Group (EFRAG) and aligned with recommendations from the Global Reporting Initiative (GRI) and the Task Force on Climate-Related Financial Disclosures (TCFD). This is intended to ensure a high level of compatibility between the ESRS and other international ESG guidelines.
The reporting standards were developed and adopted in several phases:
CSRD and ESRS in relation to other ESG guidelines
The EU taxonomy
The EU taxonomy is a comprehensive classification system that sets binding standards for environmentally sustainable economic activities. This ESG directive defines clear rules and framework conditions for when companies are considered sustainable or environmentally friendly. The focus is on six environmental goals:
Climate protection
Adaptation to climate change
Sustainable use and utilization of water or marine resources
Transition to a circular economy
Prevention or control of environmental pollution
Protection and restoration of biodiversity and ecosystems
The aim of this ESG guideline is to create standardized sustainability reporting for companies. It also aims to make sustainable activities comparable. To be considered sustainable within the meaning of the taxonomy, companies must contribute to at least one of the defined environmental goals, comply with specified minimum standards and not violate any of the environmental goals.
For sustainable finance, companies must disclose how their revenue, operating expenditure (OpEx) and capital expenditure (CapEx) meet these criteria of the ESG Directive.
Since January 1, 2022, the Taxonomy Regulation applies to large companies (> 500 employees) that fall under the NFRD as well as to companies that sell financial products in the EU . Since 2022, the directive has been applied in the environmental objectives of climate protection and adaptation to climate protection. From January 1, 2023, reporting will also be mandatory for the remaining four environmental objectives.
The Corporate Sustainability Due Diligence Directive (CSDDD) and the Supply Chain Due Diligence Act (LkSG)
The Corporate Sustainability Due Diligence Directive (CSDDD) is one of the EU's ESG directives and was adopted in summer 2024. The CSDDD obliges large European and foreign companies as well as certain SMEs throughout the EU to observe human rights and environmental standards along their entire supply and value chain. This is the first time a uniform regulation has been created across Europe.
The Supply Chain Due Diligence Act (LkSG) is one of the ESG guidelines from Germany and obliges companies to comply with human rights and environmental due diligence obligations in their supply chains. Based on this directive, companies must analyze risks, take measures to prevent and remedy them and report on them regularly.
The CSDDD is conceptually based on the LkSG, but expands the German ESG Directive in the area of environmental due diligence obligations. Companies are obliged to draw up and implement a plan to reduce their impact on climate change. This is intended to ensure that the business model and strategy are in line with the 1.5 degree target - in accordance with the Paris climate targets and the European climate neutrality target.
The ISO standards
ISO standards are international ESG guidelines that define best practices and requirements in various areas. An important standard for sustainability is ISO 14001which defines requirements for an environmental management system. It helps companies to improve their environmental performance, comply with legal requirements and achieve ecological goals.
Other important ISO standards relating to sustainability are
These voluntary ESG guidelines in the form of standards apply to any organization, regardless of size or industry, and can become indirectly mandatory through market requirements or regulatory requirements.
The Greenhouse Gas Protocol (GHG)
The Greenhouse Gas Protocol (GHG) is the world's most widely used standard for quantifying and reporting greenhouse gas emissions. Originally, this ESG guideline was drawn up solely for companies. However, the GHG Protocol is now also used by cities and countries.
The GHG Protocol is the result of a partnership between the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). This ESG guideline was first published in 2001.
The GHG Protocol provides comprehensive guidelines for the preparation of a complete and accurate greenhouse gas balance sheet, which includes direct(Scope 1) and indirect emissions(Scope 2 and 3). The ESG guideline therefore covers not only the greenhouse gas emissions that are directly attributable to the respective organization, but also the entire value chain.
Fig.: Overview of the different categories ofCO2 emissions according to the GHG Protocol across the entire value chain.
The Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) are globally recognized ESG guidelines for sustainability reporting. They provide a standardized framework for companies to measure and disclose their economic, environmental and social impacts .
The GRI Standards consist of 120 disclosure points, have a modular structure and include the universal standards, sector standards and topic standards:
The ESG guideline is applicable to all sectors. The report can be used internally to make strategic decisions, revise existing strategies and review policies. Externally, the GRI enables stakeholders to assess financial challenges and corporate performance.
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Realize the ESG guidelines with ease
Planted offers a unique combination of internal expert support, external audit by auditors and a software solution that supports you in the implementation of ESG guidelines.
FAQ on all relevant ESG guidelines
What are ESG guidelines?
ESG guidelines are frameworks or regulations that help companies to measure, report and improve their environmental, social and governance practices . The aim is to promote sustainable and responsible business practices. In addition, the commitment of companies should be made transparent and comparable.
What are the most important ESG guidelines?
The most important ESG guidelines include
- Corporate Sustainability Reporting Directive (CSRD)
- European Sustainability Reporting Standards (ESRS)
- EU taxonomy
- Supply Chain Due Diligence Act (LkSG)
- GHG Protocol
- GRI Standards
Which ESG guidelines are from Germany, which ESG guidelines apply in the EU?
The ESG guideline in Germany is the Supply Chain Sustainability Act (LkSG). The central ESG directives of the EU are the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS) and the EU Taxonomy. These ESG directives set standards for sustainable business practices and oblige companies to comply with and report on environmental, social and governance practices.
Are all ESG guidelines mandatory for my company?
Not all ESG guidelines are mandatory for every company. The obligation depends on factors such as the size of the company, its industry and its geographical location. Some ESG guidelines, such as the CSRD and LkSG, apply to certain large companies, while others are voluntary but can become indirectly mandatory through market requirements.
What is the ESG Regulation?
The ESG Regulation is not a specific directive. The term generally refers to various regulatory frameworks and standards relating to ESG criteria and reporting. Examples include the ESG directives mentioned on this page, such as the CSRD, ESRS and the EU Taxonomy.
When is a company ESG-compliant?
A company is ESG-compliant if it adheres to the relevant ESG guidelines and standards. This also includes the implementation of ESG criteria, legal requirements and the implementation of sustainable business strategies.