Understanding the ESG guidelines: a comprehensive overview

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 present the essential ESG guidelines that are crucial for your company and help you to understand the differences.

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Why are there so many ESG guidelines?

The large number of ESG directives such as CSRD, ESRS, EU Taxonomy and LkSG is 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 guide investment in green technologies The European Green Deal of 2019 set the goal of making Europe climate neutral by 2050 and reinforced the need for clear and binding ESG guidelines.

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 includes more than 140 sustainability indicators (KPIs) that companies must collect and disclose. This data must be included in the management report and audited by an auditor.

The CSRD applies:

from the 2024 financial year for large companies that are already subject to the NFRD
from 2025 for other large companies
from 2026 for small and medium-sized listed companies.

Non-reporting SMEs may also be indirectly affected by this ESG Directive if they are required to provide information to reporting counterparties.

Cover guide Step-by-step guide to CSRD

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 CSRD for reporting on environmental, social and governance (ESG) aspects. They include over 140 specific indicators that companies must collect and disclose, includingCO2 emissions, social justice and corporate governance.

CSRD and ESRS in relation to other ESG guidelines

Infographic 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

Companies must disclose how their revenue, operating expenditure (OpEx) and capital expenditure (CapEx) meet these criteria of the ESG Directive.

The EU taxonomy has applied to large companies covered by the NFRD since January 1, 2022 for reporting on the environmental objectives of climate change mitigation and adaptation. From January 1, 2023, reporting on the remaining four environmental objectives will be mandatory.

The Corporate Sustainability Due Diligence Directive (CSDDD) and the Supply Chain Due Diligence Act (LkSG)

The Corporate Sustainability Due Diligence Directive (CSDDD) is an EU ESG directive that obliges large companies and certain SMEs to observe human rights and environmental standards along their entire supply chain. They must identify risks, take measures to prevent and remedy them and report on them.

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The Supply Chain Due Diligence Act (LkSG) is an ESG guideline from Germany and obliges companies to fulfill human rights and environmental due diligence obligations in their supply chains. Based on this ESG guideline, companies must analyze risks, take measures to prevent and remedy them and report on them regularly.

The ISO standards

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ISO standards are international standards that define best practices and requirements in various areas. An important standard for sustainability is ISO 14001which defines the requirements for an environmental management system. It helps companies to improve their environmental performance, comply with legal requirements and achieve ecological goals.

These voluntary standards apply to any organization, regardless of size or industry, and may become indirectly mandatory due to market requirements or regulatory requirements.

The Greenhouse Gas Protocol (GHG)

The Greenhouse Gas (GHG) Protocol is the world's most widely used standard for quantifying and reporting greenhouse gas emissions. This ESG guideline provides comprehensive guidance for companies and organizations to prepare a complete and accurate greenhouse gas balance sheet that includes direct(Scope 1) and indirect emissions(Scope 2 and 3).

Infographic GHG Protocol

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) Standards are globally recognized ESG guidelines for sustainability reporting. They provide a uniform framework for companies to measure and disclose their economic, environmental and social impacts . The GRI Standards have a modular structure and comprise general reporting standards (GRI 101, 102, 103) and topic-specific standards (GRI 200, 300, 400), which define detailed requirements for various sustainability topics .

ESG guidelines - the best advisors and guides

Preview image Guide to implementing the ESRS

How-to: ESRS standards made easy

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Preview image CSRD info sheet

Infosheet: Compact knowledge on CSRD

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Guidance on the CSRD reporting guideline

How-to: CSRD including double materiality

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FAQ on all relevant ESG guidelines

What is an ESG guideline?

An ESG policy is a framework or regulation that helps companies measure, report and improve their environmental, social and governance practices. ESG guidelines aim to promote sustainable and responsible business practices.

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
- Lieferkettensorgfaltspflichtengesetz (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 term, but refers generally to various regulatory frameworks and standards relating to ESG practices and reporting, 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 policies and standards, including disclosure of its environmental, social and governance practices, compliance with legal requirements and implementation of sustainable business strategies.