CSRD and Sustainability: What the Reporting Mandate Means for IT Investments

8 min. read

33 of the 37 DAX companies examined are already reporting voluntarily under the European Sustainability Reporting Standards. The WWF study from October 2025 sums it up as follows: “DAX companies are already far ahead of policymakers when it comes to sustainability reporting.” At the same time, Germany missed the EU implementation deadline and was hit with infringement proceedings. While policymakers are applying the brakes, executive boards are turning sustainability into a competitive advantage – because banks factor ESG risks into lending, investors demand transparent reports, and the supply chain requires data.

The key points in brief

The Corporate Sustainability Reporting Directive (CSRD) legally makes the sustainability report part of the annual financial statements. That means the same executive board liability as for financial data.

What the CSRD requires from the board

The Corporate Sustainability Reporting Directive (CSRD) legally makes the sustainability report part of the annual financial statements. This means the same board liability as for financial data. No more separate PR report gathering dust in a cabinet. Instead, it is an audited document for which the board is personally accountable.

The 12 European Sustainability Reporting Standards (ESRS) define what must be reported. ESRS 1 and ESRS 2 (general requirements and disclosures) are mandatory for all companies subject to reporting obligations – without a materiality assessment. In addition, there are five environmental standards (E1-E5), four social standards (S1-S4), and one governance standard (G1). The Omnibus reform reduced the data points by around 64 percent and removed sector-specific standards. Even so, what remains is substantial.

Specifically required at leadership level: disclosure of how the management board and supervisory board monitor ESG risks and opportunities. Disclosure of which sustainability targets are incorporated into the executive compensation structure – or an explicit explanation of why they are not. An external audit with limited assurance is mandatory; in the medium term, reasonable assurance is the goal. The AI Act’s AI governance obligations show a similar pattern: regulation forces board-level accountability for topics that were previously handled at the operational level.

Sources: WWF October 2025, EY DAX analysis May 2025, National Regulatory Control Council

Double materiality: The framework that changes everything

What is conceptually new about the CSRD is double materiality. Every leadership team must adopt two perspectives at the same time.

Outside-in (financial materiality): How do climate risks, regulation, and resource scarcity affect the company’s financial success? Boards are familiar with this perspective from risk management. Physical climate risks (flooding, heat, supply chain disruptions) and transition risks (CO2 pricing, technological shifts, tighter regulation) are assessed systematically.

Inside-out (impact materiality): What impact do business activities have on the environment and society? This is new. A chemical company must not only report how environmental regulation affects its business, but also what impact its production has on bodies of water, soils, and local residents. Both perspectives are mandatory and must be combined. A topic is material if it is relevant from at least one of the two perspectives.

The strategic consequence: The materiality assessment is not a compliance exercise; it forces a systematic examination of the company’s own business model. According to EY, DAX companies identified an average of 7.2 out of 10 possible sustainability topics as material. This shows that almost all topics are relevant. The question is not whether reporting takes place, but how much depth it has.

Henkel, DHL, SAP: Three Paths to a Sustainability Edge

Henkel is one of the first DAX companies to have reported fully in accordance with CSRD/ESRS in 2024. Scope 1+2+3 emissions fell by 20 percent by the end of 2024 compared with the 2021 baseline year. The target: a 42 percent reduction in Scope 1 and 2 and a 30 percent reduction in Scope 3 by 2030. Henkel CEO Carsten Knobel described the company, in essence, as one that is committed “through products, processes and social contribution to a more sustainable world.” What sets Henkel apart from many others: Its sustainability strategy has not been delegated to the communications department, but is anchored at C-level.

DHL Group has the most ambitious climate strategy among logistics groups. The targets by 2030: greenhouse gas emissions below 29 million metric tons, more than 30 percent sustainable aviation fuels, 66 percent electrified last-mile vehicles and carbon-neutral design for all new buildings. In addition, women are to account for at least 34 percent of management positions. For a group with 600,000 employees in 220 countries, collecting Scope 3 data is a particular challenge – and at the same time a differentiator, because hardly any competitor can offer this level of transparency.

SAP has set itself the most aggressive climate target in the DAX: net zero across the entire value chain by 2030, aligned with the 1.5-degree pathway. Three strategic pillars – climate action, circular economy and social responsibility – are documented in the 2024 integrated report in accordance with CSRD. For SAP, its own CSRD compliance is also a product argument: Anyone who wants to sell enterprise software for sustainability reporting has to show that they have mastered it themselves.

The three companies demonstrate different levers: Henkel optimizes products and processes (emissions reduction as a core competence of a chemicals/consumer goods group). DHL is transforming physical infrastructure (fleet electrification, sustainable fuels, green buildings). SAP uses sustainability as a business model amplifier (its own compliance as a reference for customer solutions). For executive boards in other industries, the question is: Which of these three levers fits their own business model? The answer lies in the double materiality assessment – it shows where the biggest risks and the biggest opportunities lie.

DAX Balance Sheet 2024: Progress and Gaps

The EY analysis from May 2025 provides the most nuanced picture of DAX sustainability performance. Scope 1+2 emissions fell by 6 percent in 2024 – 11.6 million metric tons less than in 2023, from 184.1 to 172.6 million metric tons of CO2 equivalents. That is progress.

Scope 3 emissions, however, rose by 19 percent to 4.1 billion metric tons. EY attributes the increase primarily to new reporting requirements: For the first time, companies must make their entire value chain transparent. So the increase does not necessarily reflect higher emissions, but greater transparency. That is an important distinction – and at the same time an argument for the CSRD: Without mandatory reporting, these emissions would have remained invisible.

The energy balance shows the biggest gap: Only 15.7 percent of the total energy consumption of DAX groups comes from renewable sources. 84 percent is still fossil-based. The range is enormous: Deutsche Telekom sources 93 percent from renewables, Porsche 75 percent. At the other end: RWE at 4.1 percent and BASF at 4.8 percent. For executive boards that want to position sustainability as a competitive advantage, the energy source is the most obvious lever.

Why banks are increasing the pressure

Since January 2025, the EBA Guidelines EBA/GL/2025/01 have applied, requiring German banks to systematically integrate ESG risks into lending. This is not a soft signal, but a hard regulatory requirement for the banking system.

The consequences for companies are measurable: For companies with an existing sustainability report, 40 percent of credit decisions are already influenced by ESG factors. For SMEs without ESG data, the figure is still only 25 percent – but the trend is clear. Companies with strong ESG performance receive interest rate discounts and preferential terms. Companies without ESG management risk risk premiums and restricted credit lines, especially climate-intensive business models without a documented transformation plan.

For CEOs and CFOs, this means: CSRD compliance is not just a reporting obligation, but a financing advantage. Those who use their sustainability report to proactively inform banks about their own ESG strategy improve their credit terms. Those who wait until the bank asks pay more.

CSRD readiness: Where do German companies stand?

The PwC Global CSRD Survey 2024 surveyed 65 German companies and presents an ambivalent picture. 62 percent feel well prepared. 51 percent have completed the gap analysis, 45 percent the double materiality assessment. That sounds like progress.

The challenges, however, are substantial: 79 percent cite staff capacity as the biggest problem, 77 percent data quality and 72 percent the complexity of supply chain data. SMEs are particularly affected: Even companies that are not directly subject to reporting requirements are being brought in through the supply chain because their customers demand CSRD data from them.

The expected benefits outweigh the downsides in executives’ perception: 69 percent expect better risk management, 61 percent better stakeholder communication. 80 percent of German executives already include sustainability in their decisions. The Deloitte/DRSC 2025 study shows: DAX reports average 156 pages, MDAX 133 and SDAX 93 – CSRD reporting is no longer a footnote, but a substantial document.

The Opposing View: Bureaucracy, Costs and Omnibus

The criticism of the CSRD is justified and should not be ignored. The National Regulatory Control Council puts the total costs for Germany at 1.6 billion euros. In the first year, mid-sized companies expect costs of 150,000 to 500,000 euros for software, consulting and internal resources. For a company with 200 million euros in revenue and a 5 percent EBIT margin, 500,000 euros equals 5 percent of profit – that is no small amount.

The Omnibus reform (from March 2026) responds to this criticism: The reporting threshold will rise to 1,000 employees and 450 million euros in revenue. The number of data points will fall by 64 percent. Listed SMEs will be removed from the scope entirely. Wave 2 of the reporting obligation (originally for financial year 2025) has been postponed to 2027. This is a significant easing of the burden – but at the same time it carries the risk of reducing the pressure to reform.

The risk of greenwashing remains, even with the CSRD. Reporting in detail does not necessarily mean acting well. The audit requirement (limited assurance) reduces the scope for unsupported claims, but does not eliminate it. And the danger of “reporting instead of acting” – extensive reports without real transformation – is real.

There is also the political dimension: Germany missed the EU implementation deadline (6 July 2024) and was hit with infringement proceedings. The national implementation act was still not in force at the end of 2025. The signal is contradictory: policymakers are calling for less bureaucracy, but delaying the legal certainty companies need for their planning. For executive boards, the CSRD is therefore not just a reporting task, but a transformation task: The report must reflect what the company is actually doing. And the Omnibus relief should not be interpreted as a reason to wait, but as an opportunity to use the time gained for substantial improvements rather than mere compliance.

What Executive Boards Should Do Now

First: Prioritize the double materiality assessment. It is the foundation of every CSRD report and forces a strategic examination of climate risks and business model impact. 45 percent of the companies surveyed have already completed it. Anyone who has not started yet needs to begin now.

Second: Integrate sustainability into compensation. The ESRS require disclosure of whether and how sustainability targets are incorporated into executive board compensation. Anyone who answers “no” must explain why. Anyone who answers “yes” sends a strong signal to investors and banks.

Third: Collect Scope 3 data proactively. The EY finding (a 19 percent increase in Scope 3 emissions due to transparency for the first time) shows that the biggest surprises are hidden in the supply chain. Companies that do not have the data cannot report – and lose their lead over competitors that are already transparent.

Fourth: Use the sustainability report as a sales tool. Banks, investors and B2B customers are increasingly assessing ESG performance as a criterion for business partners. A robust CSRD report is not overhead, but a sales argument – much like an ISO certification or a TISAX label.

Fifth: Switch energy sources. The EY analysis shows the biggest gap: 84 percent of the DAX’s energy consumption is fossil-based. Deutsche Telekom, with 93 percent renewables, shows that an almost complete switch is possible. For any company that wants to be credible in its sustainability report, the energy source is the most visible and measurable lever. This applies especially to BASF (4.8 percent renewables) and RWE (4.1 percent) – companies whose sustainability reports will only become credible if the energy transformation becomes visible in their core business.

Frequently Asked Questions

Further Reading

• AI governance at C-level: Between innovation and regulation
• The CFO as a driver of transformation: How finance chiefs are funding the reboot
• Reboot Germany: 735 billion, three mid-sized companies and the question of whether the crisis is really that bad

Frequently Asked Questions

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