Sustainability is essential for businesses. Strict regulations such as the CSRD and the Supply Chain Act make sustainable strategies mandatory in EU. Violations can result in fines of up to 2% of global annual turnover. At the same time, 88% of consumers and 75% of employees expect companies to take responsibility. This growing demand for accountability is echoed globally: a 2023 PwC survey found that 76% of consumers say they will stop buying from companies that treat the environment, employees, or the community poorly (PwC ESG Consumer Intelligence Series). But how can implementation succeed? Here are the 10 most important measures:
These measures help meet legal requirements, reduce costs, and achieve real progress in sustainability. Companies that act now secure long-term advantages and competitiveness. According to McKinsey, organizations that integrate ESG into their core strategy can increase shareholder value by up to 10% and are better positioned to attract investment and talent (McKinsey & Company).
A well-thought-out sustainability strategy with clear objectives is key to meeting regulatory requirements while achieving positive effects for the environment and society. Aligning with frameworks like the UN Sustainable Development Goals (SDGs) and using SMART criteria ensures that targets are actionable and measurable (Elliott Davis).
From the outset, the strategy should be aligned with the current legal framework. For German companies, this means linking the sustainability strategy with the requirements of the CSRD and the Supply Chain Due Diligence Act (LkSG). An integrated approach that considers the common principles of these regulations creates synergies and facilitates implementation.
"Navigating the complex landscape of regulations like CSRD, CSDDD, and LkSG doesn’t have to be overwhelming. By aligning your strategy and focusing on shared principles, you can streamline compliance while driving meaningful change in sustainability and due diligence for human rights and the environment." – Maxine Bichler, Reporting Expert
Companies already meeting LkSG requirements can leverage their experience to efficiently prepare for the CSRD. This regulatory foundation provides a clear roadmap for further action.
A good starting point is basic steps like defining responsibilities, conducting a double materiality analysis, and preparing an initial CSRD test report. These steps create a solid foundation, regardless of company size. Additionally, a due diligence policy should be developed that meets both LkSG and CSRD requirements. Regular risk assessments help identify potential risks in the supply chain regarding human rights and environmental standards. Integrating LkSG processes into CSRD reporting enables both legal requirements to be addressed efficiently. With clearly defined actions, the actual impact on the environment and society can also be transparently communicated.
The 17 Sustainable Development Goals (SDGs) provide a proven framework for setting concrete and measurable targets. Germany aims to be greenhouse gas neutral by 2045 and to reduce emissions by at least 65% by 2030 compared to 1990. Goals should be formulated according to the SMART criteria (specific, measurable, achievable, relevant, time-bound) to regularly monitor progress and report using suitable indicators. Actively involving stakeholders from civil society and the private sector amplifies the impact of these measures.
Sustainability and economic efficiency go hand in hand. By integrating ecological and social aspects into cost assessments, companies can secure both efficiency gains and long-term stability. This is crucial given rising costs, volatile markets, and stricter environmental regulations. Life cycle costs (LCC) are an important tool for expressing sustainability aspects in monetary terms. Resource efficiency measures can not only reduce environmental impact but also positively influence cost structures. Concepts like the circular economy reduce dependence on primary raw materials and lower costs. At the same time, digital technologies and Industry 4.0 solutions help optimize processes, minimize resource consumption, and reduce waste. Professional software solutions are essential to manage the complexity of sustainable cost management.
Without clearly defined responsibilities, sustainability often remains just lip service. German companies therefore need solid organizational structures that meet legal requirements and enable sustainable value creation.
The Supply Chain Due Diligence Act (LkSG) and the EU Corporate Sustainability Reporting Directive (CSRD) set clear standards for companies. Since January 2023, these regulations apply to companies with more than 3,000 employees, and from January 2024, to those with over 1,000 employees. The requirements include risk management systems, policy statements, preventive and remedial measures, and the establishment of complaint procedures. There are also extensive documentation and reporting obligations. The consequences of non-compliance are significant: In addition to fines of up to 8 million euros or up to 2% of average annual turnover (for companies with turnover over 400 million euros), there is a risk of exclusion from public contracts in Germany for up to three years. These legal requirements make it clear how important it is to define responsibilities and integrate them into company structures.
It is crucial to determine early on which individuals and teams are responsible for sustainability reporting. So-called “no-regret measures”—risk-free, future-oriented steps—can help minimize uncertainties in implementing the CSRD. While board members must understand climate risks and their impacts, operational responsibility for identifying and assessing them should be delegated to a specialized management team that reports directly to the CEO and board. Practical measures could include:
Such structured approaches lay the foundation for measuring progress using clearly defined KPIs.
ESG metrics (Environmental, Social, Governance) provide tangible indicators to assess a company’s performance in these areas. They help document progress, set targets, and inform stakeholders. Examples of governance metrics include:
However, a 2022 Economist Impact study shows that only 36% of companies have integrated social aspects into their strategy, compared to 47% that consider environmental impacts. This highlights the untapped potential, especially in capturing social metrics (Economist Impact).
Clear governance structures are not only necessary for legal compliance but also bring economic benefits. Sustainability should not be seen merely as a strategy, but as an integral part of corporate culture.
"A sustainable company needs ESG not just as a strategy, but as part of its DNA. This means only companies that establish clear processes and responsibilities for ESG can act credibly and successfully." – KPMG
Modern technologies such as AI and blockchain can significantly improve transparency and accuracy in ESG measurement. The trend is toward data-driven ESG tracking that enables real-time reporting. To achieve this, companies should regularly review and adapt their governance structures. Greater involvement of the board and management, as well as consistent data collection and reporting practices, are crucial to ensure the integrity of information.
A solid sustainability strategy starts with a detailed assessment. A systematic audit uncovers weaknesses and provides the necessary data to set realistic goals and make progress measurable.
New reporting obligations, as mandated by the CSRD (Corporate Sustainability Reporting Directive) and the Supply Chain Act, make structured data collection indispensable. From 2025, around 13,200 German companies will have to submit their first CSRD reports, covering over 1,000 data points across ten ESG areas (environment, social, and governance). Topics include pollution, resource consumption, and biodiversity. The Supply Chain Act additionally requires companies to implement risk-based procedures to identify, assess, and address human rights and environmental risks in their supply chains. Annual reports must be published by June 30 on the company website and in the Federal Gazette and are subject to independent review. A well-executed audit can efficiently cover the requirements of both regulations. Interestingly, companies already subject to CSRD reporting do not need to submit additional reports under the Supply Chain Act.
Conducting a sustainability audit requires a clear approach. The first step is to develop a due diligence policy and thoroughly analyze supply chains. Modern software tools can help make supply chain management more efficient and ensure traceability. See also EUDR compliance and traceability. Regular supplier audits and transparent communication with partners in the value chain are also essential. To support smaller businesses, the German government offers funding programs, such as financial subsidies for energy audits. One example of the success of such programs: For every euro of government funding, 17 to 33 euros in private investment were mobilized. Participating companies implemented an average of 1.7 to 2.9 additional energy efficiency measures (IEA Energy Efficiency 2023).
A baseline analysis is key to making progress concrete and traceable. It is important to distinguish between metrics that measure activities (outputs) and those that assess results (outcomes). An impressive example is the Better Life Farming (BLF) Alliance by Bayer. Since its launch in 2018, over 2,700 BLF centers have been established in eight countries, supporting more than one million smallholder farmers. A baseline survey of 700 farmers in India showed that 60% reported increases in productivity and income after one year—rising to 90% the following year. Quality of life also improved: the proportion of farmers with higher life satisfaction rose from 71% to 87%, while those experiencing less stress increased from 42% to 79% (Bayer Better Life Farming).
Sustainability audits are not just a mandatory exercise but an investment in the future. They lay the foundation for continuous improvement and strategic decision-making. German energy audit programs show the significant savings potential. One evaluated program resulted in average savings of 2,824 MWh of final energy and 1,054 tons of CO₂ per year. Cost savings ranged from -0.4 to 6 euros per MWh saved, while CO₂ costs dropped by 1.8 to 4.1 euros per ton. Solid data management is crucial for preparing reports according to EU taxonomy standards and for continuous improvement. Software tools simplify data collection and analysis. Early stakeholder involvement and regular feedback keep the focus on relevant and effective metrics. A thorough assessment lays the groundwork for consistent and sustainable action.
Reviewing supply chains and implementing sustainable procurement practices are not only legally binding for German companies but also a key step to minimize compliance risks and secure long-term competitive advantages. Here are the essential measures and strategies companies should consider.
The German Supply Chain Act (LkSG) has required companies with more than 3,000 employees since 2023, and those with at least 1,000 employees from 2024, to implement a comprehensive risk management system. The goal is to ensure compliance with human rights and environmental standards throughout the supply chain. Requirements include:
Non-compliance can result in hefty penalties: up to 8 million euros in fines or 2% of global annual turnover for companies with over 400 million euros in revenue.
| Due Diligence Measure | Description |
|---|---|
| Risk management system | Identification, assessment, and mitigation of risks in the supply chain. |
| Definition of responsibility | Appointment of a responsible person. |
| Risk analysis | Regular review for possible violations. |
| Policy statement | Setting the company’s human rights objectives. |
| Preventive measures | Actions to prevent violations. |
| Remedial measures | Intervention in existing or potential problems. |
| Internal complaints procedure | Establishment of a secure and accessible system for complaints. |
| Documentation | Careful record-keeping of all processes and obligations. |
These measures form the foundation for legally compliant and sustainable corporate management.
Integrating sustainable procurement strategies into business processes not only strengthens internal governance but also optimizes external operations. According to a survey of 2,000 German companies, many are already implementing measures to comply with human rights and environmental standards in their supply chains. Effective approaches include:
Sustainable procurement can make a significant contribution to environmental and social goals. ESG criteria (environment, social, governance) are increasingly being integrated into procurement processes, as evidenced by 99% of S&P 500 companies reporting on them in 2023 (Harvard Law School Forum on Corporate Governance). Some figures highlight the potential:
Success stories demonstrate how companies achieve measurable results through sustainable procurement:
Sustainable procurement is not just a matter of compliance, but also a means to increase efficiency and competitiveness. Companies with strong ESG profiles demonstrably reduce costs by 5–10% and often achieve growth of 10–20% (McKinsey & Company). The benefits of sustainable procurement go far beyond legal compliance and offer a real opportunity for long-term success.