Just according to the letter of the law, only around 500 large corporations in Germany will be affected by the new legislation on sustainability reporting starting from 2018. This is because the reporting requirement taking effect on 1 January will only apply to capital-market-oriented companies, financial service providers and insurance companies that employ more than 500 people, have total assets of more than EUR 20m, or generate annual sales of more than EUR 40m.
Reporting requirements as part of the supply chain
However, Landesbank Baden-Württemberg (LBBW) believes that the implementation of the EU Directive on Corporate Social Responsibility (CSR) will soon result in more and more SMEs publishing sustainability reports, too. This is attributable to a kind of chain reaction: The investigations carried out by the large corporations that are subject to reporting requirements in order to describe their supply chains force their suppliers to gather sustainability data on their part – even if these companies actually fall below the legally stipulated reporting threshold. Consequently, all of these medium-sized companies will already incur costs that could expediently be used to produce their own sustainability reports.
„As the topic of sustainability becomes increasingly important, more and more companies will expand their financial reports to include sustainability aspects.“- Martin Dresp, Analyst, LBBW Research
Transparency along the entire value chain
One striking example of such effects in a supply chain can be seen at the automotive group BMW in 2016. In order to increase transparency and resource efficiency along the entire value chain, around 5,600 BMW suppliers worldwide were sent a detailed questionnaire on sustainability. On this basis, the automotive group carried out a rigorous assessment: Suppliers that did not meet the minimum requirements had to submit a plan for corrective measures. Acting sustainability and being able to provide specific information on this is therefore increasingly becoming a prerequisite for business success for medium-sized suppliers, too. Of course, this also applies to companies that do not supply DAX companies, as can be seen in the case of EDEKA Südwest, which is organized as a cooperative. You can read about how the fresh food specialists handle the topic of sustainability and what they expect from their suppliers in this interview with the head of the Sustainability department, Michaela Meyer.
Benefits can compensate for costs of sustainability reports
Companies along the supply chain could derive considerable benefits from producing their own sustainability reports, assesses LBBW analyst Martin Dresp: “The positive effects often more than compensate for the cost of the reports.” For example, the knowledge gained about the company may suggest approaches for reducing costs when it comes to energy or materials management. In addition, a good sustainability report can open doors to sustainability-focused investors and improve the company’s reputation among employees, applicants and potential customers. .