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Recommendations for the design of sustainability reporting standards in the context of the Corporate Sustainability Reporting Directive (CSRD)

The European Commission's draft on the further developed Corporate Sustainability Reporting Directive (CSRD) announces, among others, the development of European non-financial reporting standards to be applied by all companies falling under the scope of the directive. Based on a comprehensive evaluation of non-financial statements of German companies and supplementary expert interviews, this policy paper formulates proposals for the design of these standards in order to improve reporting on environmental issues. 

In doing so, the paper addresses the requirements to be met in reporting on environmental targets, actions and indicators. In addition to specifying requirements for the individual elements, the paper also focuses in particular on a consistent overall picture from which the results of actions and their contributions to the achievement of targets can be read. Additionally, the topic of greenhouse gas neutrality is addressed. Here, recommendations are made to align reporting on the goal of greenhouse gas neutrality more closely with global and European climate goals and to make reporting on this more meaningful. In particular, it is recommended to orient towards the Net Zero understanding of the Science Based Targets Initiative (SBTi) and to clarify that voluntary offsetting of CO2 emissions is not a neutralization option in the context of the Net Zero target. 

Finally, the paper focuses on how to make reporting on environmental issues compatible with disclosure requirements for the financial industry. For this purpose, the standards should at least include all mandatory adverse environmental indicators that have to be reported by the financial industry according to the so-called Sustainable Finance Disclosure Regulation (SFDR). Reporting on each environmental topic should be mandatory. However, the level of detail of the reporting with regard to topic-related strategies, policies, targets and measures should be based on the relevance of the respective topics for the company.

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