Sustainability

In a time of constant change, sustainable corporate governance is becoming increasingly important and is developing into a true success factor. In order to achieve this, companies must place a strong focus on ESG criteria and their CSR strategies as well as the transformation to a sustainable company.

Our experts will work with you to develop an overarching strategy for modifying existing and implementing new ESG processes and systems. You will receive a reliable overview of all your company’s ESG obligations. We conduct materiality analyses for the transformation, develop key figures with you and help you to create the database for your reports.
 
Initial assessment of the status quo
o    ESG readiness check
o    Determination of material sustainability aspects

Report preparation process
o    Advice on the fulfillment of ESG reporting obligations
o    Maturity level / potential for improvement of reporting systems 
o    Selection and implementation of current and new sustainability standards
o    Optimization of ESG processes, data flows and transparency

Compliance
o    Benchmarking of the ICS with regard to sustainability information
o    Implementation of suitable internal control systems
o    Integration of sustainability aspects in risk management systems
 

Perhaps you have already entrusted us with the preparation of your annual financial statements. We are also happy to support you in the preparation of your non-financial reporting. In this regard, we draw on the expertise of all Baker Tilly disciplines.

In doing so, we follow the tried and tested Baker Tilly ESG model approach for the preparation of sustainability reports when reporting, defining and compiling the necessary information: 

• Materiality analyses and identification of key stakeholders 
• Definition of key objectives and identification of key risks 
• Selection and development of key figures / KPIs
• Data collection 
• Definition of measures

This gives you the security of comprehensive ESG/CSR reporting that meets all regulatory requirements.

According to the current draft directive on the revision of the CSR Directive, large companies will also be obliged to include more sustainability in their management reports for the 2023 financial year for the first time. Small capital market-oriented companies must report for the first time in the management report for the 2026 financial year.

The inclusion of information in the management report also raises the question of whether this information must be audited. After all, the auditor also confirms the management report’s compliance with statutory provisions with his audit opinion. But how does the auditor ensure audit assurance in this new audit area and what requirements must a company’s documentation meet in order to continue to receive an unqualified audit opinion for its annual financial statements?

Clarification of the obligation to audit non-financial information
Sustainability reports and non-financial statements are currently not subject to a content audit by an auditor, who only has to check that they were submitted on time and, if necessary, check the reference in the management report to the place of publication (Art. 317 (2) sentence 4 HGB).

With the introduction of the revised regulations on non-financial reporting, the audit obligation changes as well. While the audit obligation for capital market-oriented companies with more than 500 employees currently lies with the supervisory board (Art. 171 (1) sentence 4 AktG), the introduction of the new regulations on non-financial information in the management report requires the auditor to audit this information. On the basis of the – in contrast to the preparation process – less specified auditing standards, the auditor is temporarily granted limited assurance for the audit of this information.

Documentation requirements in accordance with current audit standards
ISAE 3000 on the audit of information other than historical financial information is currently the relevant auditing standard. The standard setters are working intensively on new auditing standards tailored to sustainability reporting. In principle, it can already be stated that the auditor’s risk-oriented audit approach will be retained, meaning that a company to be audited must be prepared for the following audit procedures.

• Audit of the internal control system: documentation + implementation + controls
• Double materiality: Documentation on the completeness and relevance of non-financial information for shareholders and stakeholders
• Case-by-case audits: Document review of the data basis of key figures, accuracy of measurement methods and estimated values
• Analytical audit procedures 
• Structured merging of business activities with the taxonomy

In order to prepare for the new requirements, it is advisable to consult with your auditor in good time. Our services in this context include the audit...

• of processes for data collection of non-financial information
• of non-financial statements
• of sustainability reports
• according to ISAE 3000

The Supply Chain Due Diligence Act, or “Supply Chain Act” for short, is of particular importance for the planning and implementation of a sustainable supply chain.

The law was passed by the German Bundestag on June 11, 2021 and is intended to ensure compliance with due diligence obligations with regard to human rights and environmental protection in corporate supply chains.

Which sectors and companies need to take action? What due diligence obligations need to be observed and how can these be implemented in practice? We explore these questions on our focus page on the Supply Chain Act.

Our experts advise you on all aspects of sustainable financing. We will show you how you can benefit from a sustainable financing structure in the long term.

Sustainable finance refers to financing activities that relate to both the mitigation and prevention of environmental and climate damage (E), the promotion of social measures (S) and sustainable corporate governance (G).

This is based on the Paris Agreement and the EU Action Plan. On May 5, 2021, the Federal Cabinet adopted the first German strategy for sustainable finance. The strategy aims to mobilize urgently needed investments for climate protection and sustainability and at the same time addresses the increasing climate risks for the financial system.

The European Banking Authority’s (EBA) guidelines on lending and credit monitoring require appropriate consideration of ESG aspects. This necessitates a comprehensive quality campaign and a review of processes in new lending and existing business at banks. The banks’ internal rating systems are now being successively expanded to include ESG factors in order to give them greater weight in the lending decision process in future.

Sustainable financing solutions/instruments can be divided into two categories: earmarked ESG financing and ESG-linked financing. Earmarked ESG financing is characterized by the definition of a narrow purpose for the financing funds. In the case of ESG-linked financing, on the other hand, KPIs and ambitious SPTs (“sustainability performance targets”) are defined, which are accompanied by a positive or negative change in the margin in the event of corresponding under- or overperformance. In particular, external ESG ratings are used in order to measure ESG performance.

Our experts will help you select the right sustainable financing solutions/instruments at an early stage, support you as your personal sparring partner in discussions with financing partners and ultimately find a customized, sustainable financing structure that matches your business model and strategy.
Further information on corporate financing is available on the pages of our Debt Advisory Competence Center.
 

In an ESG (Environment, Social, Governance) due diligence as part of our integrated transaction advisory services – but also as a stand-alone service – we support and advise you in the context of company acquisitions and sales in determining the relevant ESG risks. Environmental, social or organizational aspects can have a decisive influence on the accuracy of the target’s valuation. 

Together with you, we determine the scope of the audit, the individual key audit matters and the KPIs that are particularly important for the transaction at hand. Based on this agreed catalog, we review the target company’s ESG situation, including existing ESG policies, practices and experience, and present the potential negative impacts and financial, tax and/or legal risks resulting from the audit in a corresponding ESG report. If we also advise you on the drafting of the corresponding transaction agreements, we implement our findings in these agreements in consultation with you in the form of risk-adequate guarantee and indemnification provisions.

We also conduct corresponding ESG due diligence if you are planning to raise large-volume financing and want to professionalize and facilitate the process by providing corresponding ESG due diligence reports (vendor due diligence).
Further information on our transaction services is available on the pages of our Transactions Competence Center.
 

The socio-political trend towards greater sustainability and compliance with ESG criteria in the economy is also further increasing the demands on the public sector to act as a role model for the environmentally friendly and socially responsible awarding of contracts.

The public sector, which is committed to the common good, has a special responsibility to protect the environment and comply with social criteria. This obligation is also reflected in construction, supply and service contracts. European and German public procurement law has now developed a differentiated regulatory system that enables, and in some cases even requires, environmental and social aspects to be taken into account when awarding public contracts.

We will be happy to advise you on the relevant legal requirements for all stages of a procurement procedure, on the possibilities, but also the limits of sustainable procurement and on existing special regulations and information services for individual products or services such as IT equipment. This includes, for example,

• the specific importance of the strategic procurement objectives of quality, innovation and the social and environmental aspects of Art. 97 (3) of the German Act against Restraints of Competition (“GWB”) 
• the mandatory new regulations on environmentally friendly procurement in the Recycling Management Act (“KrWG”), in the Federal Climate Protection Act (“KSG”) and in the General Administrative Regulation on the Procurement of Energy-Efficient Services (“AVV-EnEff”) already at the level of determining requirements
• the admissibility of a product- and therefore company-specific invitation to tender for the implementation of specific environmental aspects
• reference to environmental quality labels such as the “Blue Angel” or the use of functional or performance requirements in the specifications (so-called functional tendering)
• the possibilities of negotiated procedures to utilize the environmental innovation power of the market
• the definition of specific suitability criteria relating to the environmental aspects of the contract’s subject matter
• the importance of environmental management systems, e.g., EMAS registration, as part of the suitability criteria
• the consideration of environmental aspects as an award criterion when determining the most economically advantageous tender pursuant to Art.127 (1) sentence 4 GWB
• the admissibility and limits of ecologically justified contractual conditions in the execution of a contract pursuant to Art. 128 (2) sentence 3 GWB
• the still largely unclear effects of the new Supply Chain Due Diligence Act (“LkSG”) on the procurement procedure, including its applicability to public corporations or the future significance of the suitability criterion of the “supply chain management and supply chain monitoring system” in Art. 46 (3) No. 4 of the Public Procurement Ordinance (“VgV”) 
• to ensure that public contracts are not only awarded in an environmentally but also socially responsible manner

​​​​​​​Further information on our services relating to Public Procurement Law is available here.​​​​​​​