Sustainability reporting is taking shape: From a voluntary PR measure to a mandatory, auditable disclosure obligation

The Corporate Sustainability Reporting Directive (CSRD), an EU directive on sustainability reporting introduced in 2023, obliges European companies to report in accordance with the European Sustainability Standards (ESRS) from 2025. The aim of the CSRD is to improve the quality, comparability and reliability of sustainability reporting and to oblige companies to disclose the environmental and social impact of their actions. Since its introduction, however, there has also been criticism regarding its implementation. In response, the EU Commission announced extensive relief from the reporting obligations at the end of 2024 with the so-called “Omnibus” initiative.

But how has sustainability reporting changed as a result of the new requirements? Have companies become more transparent? Are there differences between the DAX40- and EuroStoxx-50 companies? And what further developments are still necessary to improve implementation?

A new study by the Sustainability Reporting Navigator, a sub-project of TRR 266 “Accounting for Transparency”, examines exactly these questions. The researchers analyzed the 2024 sustainability reports of the DAX40- and EuroStoxx50-companies (according to CSRD) and compared them with the reports from 2023 (according to NFRD). Selected indicators were used to examine the scope, quality and level of transparency.

The first CSRD-compliant reports clearly show that sustainability reporting has matured. The focus is shifting from image-driven communication to a structured and fact-based presentation. On average, the reports are longer, more analytical and less promotional. However, even if progress is visible, the quality remains inconsistent. The path towards comparability has been laid – but the goal has not yet been reached.

The study by researchers Katharina Hombach (Goethe University Frankfurt), Maximilian Müller (University of Cologne) and Thorsten Sellhorn (LMU Munich) provides six key findings:

1. More volume, but big differences across companies.

The introduction of ESRS has significantly increased the amount of information in the DAX40: The average scope of reporting has grown by 15% to around 130 pages compared to 2023, while the amount of text alone has increased by as much as 33%. At the same time, there are major differences. Companies that published rather short reports in 2023 published significantly longer reports in 2024 and thus recorded the largest increases in the scope of reporting. However, some large companies such as Deutsche Bank, Deutsche Telekom, Sartorius and Mercedes-Benz published significantly shorter reports in 2024 than in the previous year. The reason: reporting has been integrated from a separate sustainability report into the management report – with a correspondingly leaner form.

2. Balance and depth of the reports are also increasing.

The ten ESRS standards cover the areas of environment, social affairs and corporate governance. The research results show that Companies that previously hardly reported on sustainability have clearly adapted to the new standards. The most frequently mentioned topics according to ESRS: climate change (E1), own workforce (S1) and business conduct (G1). Despite high relevance in global supply chains, social impacts on affected communities (S3) receive relatively little attention in reporting. On average, the amount of information provided for all ten ESRS standards is increasing – but to varying degrees and from different starting levels.

3. Materiality assesment is key – and remains a black box.

Whether and how companies report on ESG issues depends heavily on the so-called materiality assessment, i.e. the individual question of which issues companies consider to be financially or socially relevant. The new reporting structure makes reports more comparable and more objective overall, e.g. by using quantitative thresholds to assess when information is material. However, differences remain. The consequence: even within an industry, the reports varies significantly, as companies in the same industry sometimes consider different topics to be significant. This is a leverage point for the upcoming omnibus reforms: A standardized methodology with mandatory disclosure would improve comparability and strengthen trust.

4. There is also variation in additional voluntary disclosures.

Many companies make use of the relief options: disclosures that are not yet mandatory in the first year of application (2024). Some companies provide this data anyway, e.g. value chain data or prior-year comparatives. For other topics like information on the financial impact of environmental issues the option to not provide data is comprehensively exercised. Around one in five companies already has (at least selected key figures) audited with reasonable assurance.

5. Sustainability reports are becoming similar to financial reports.

The 2024 reports illustrate that increasingly standardized terminology and less colorful images are being used. The reports are usually clearly structured in line with the ESRS requirements and contain numerous data tables. Instead of a promotional marketing brochure with carefully selected information, it is now more of a compliance document: the tone is becoming more factual, the language is becoming more standardized, technical and complex, and the target group is evidently becoming more professional. Whereas previous reports often contained one- sided positive descriptions, the new reports are more differentiated and analytical. This is not a weakness, but a maturing process: sustainability reporting is becoming more transparent and credible.

Sustainability reporting is thus approaching the quality of financial reporting and even exceeds it in scope for most companies.

6. DAX companies’ reporting is similar to that of their European competitors – with the exception of selected areas of flexibility.

Sustainability reporting in the DAX40 covers a similar range of topics to that of large European companies. However, two special features stand out in comparison: Firstly, many DAX companies focus specifically on quality signals. For example, they more frequently have individual key figures checked with reasonable assurance or include more detailed information along the value chain. On the other hand, they make greater use of the scope provided by the reports. Although this reduces the effort involved in initially preparing the report, it comes at the expense of transparency, for example through more frequent cross-references to other documents, fewer comparative figures from the previous year or cautious disclosures on sensitive topics. Transitional arrangements for certain data are also used more frequently. It is also noticeable that topics such as affected communities, consumers and end users are less frequently classified as material in the DAX. Overall, a rather cautious implementation style is evident: there are recognizable efforts to ensure quality, but the depth is often selective.

Conclusion: A large majority of DAX40 companies apply ESG reporting – despite the lack of CSRD implementation in Germany

Despite the ongoing omnibus debate, which proposes significant changes to the CSRD, the majority of DAX40 companies use the ESRS in their reporting. It is to be expected that large, capital market-oriented companies will continue to report to this extent in the future and thus not fall significantly below the new transparency level set by the ESRS.

Outlook: Further development necessary

A sustainable further development of reporting requires standards that offer consistent guidelines without losing impact due to unnecessary complexity or avoidable discretionary scope. Reliable audit mechanisms and consistent supervision are needed to ensure trust in the system.

A more transparent materiality assessment

The quality of ESG reporting is largely determined by the companies themselves. The key lever here is the materiality assessment, which companies use to define the content framework of their reporting on their own responsibility. The decisive factor here is how transparently processes are disclosed, for example the extent to which different stakeholder perspectives have been taken into account.

A carefully documented, comprehensible procedure in line with the wording and spirit of the ESRS strengthens confidence that uncomfortable topics are also being addressed and that the focus is not solely on external presentation. Once the key ESG aspects have been identified, a clear structure and machine-readable data sets (provided voluntarily to date) support the analysis by users. After all, it will take some time before automated systems are able to analyze conventional PDF reports completely and accurately.

Overall, it is clear that sustainability reporting has changed from a voluntary communication tool to a binding, verifiable disclosure obligation. ESG information must be prepared just as carefully, systematically and comprehensibly as key financial figures. Companies should be aware of the implications of this change. Otherwise, they will not only be exposed to regulatory risks, but also jeopardize their own credibility in relation to investors and other key stakeholders.

More in-depth analyses and thematic deep dives are in preparation and will be published on the website of the  Sustainability Reporting Navigator in the coming weeks.

Interested parties can also access the current studie and all previously published CSRD reports with curated analyses at www.sustainabilityreportingnavigator.com.