2023-05-25 21:03:11
VMany small and medium-sized companies will soon be faced with the major task of providing information about the sustainability of their business and corporate management and having these reports checked. The Chamber of Public Accountants (WPK) drew attention to the resulting challenges during its annual press conference on Thursday. According to WPK President Andreas Dörschell, not all of the companies affected by the new rules are clear about their reporting and auditing obligations.
The background is the “Green Deal” proclaimed by the EU Commission, which aims to anchor environmental protection, social standards and conscientious corporate governance in the economy. Investors should preferably invest their money in companies that care about the environment, society and good corporate governance, or ESG for short. One component of this mammoth project is the EU’s sustainability directive, known internationally as the CSRD.
The guideline came into force in January 2023 and aims to give sustainability reporting the same priority as traditional annual accounts. According to the WPK, the number of companies that have to draw up sustainability reports and have them checked will increase in several stages from the current 500 to 15,000 companies in Germany in the future. In addition, there are another 18,500 public companies, 16,000 of which are municipal companies. In the EU, a total of 45,000 companies will be subject to the new reporting requirements.
More and more companies are affected
Large capital market-oriented companies as well as banks and insurance companies with more than 500 employees have had experience with sustainability-oriented reporting for some time, because they have had to issue a declaration on the environment, employees, social affairs, human rights and anti-corruption since the 2016 financial year and can voluntarily check this declaration built into their management report permit. In addition to the balance sheet and profit and loss account, the management report is part of the annual financial statements. For the reporting of small and medium-sized companies, on the other hand, sustainability issues are largely new territory.
The EU CSRD directive gradually expands the reporting and auditing obligation in terms of sustainability from large to medium-sized and small companies. From the 2024 financial year, the reporting and auditing obligation will initially apply to listed companies as well as banks and insurance companies with more than 500 employees. From the 2025 financial year, the rules will also apply to all other larger companies with more than 500 employees, i.e. regardless of whether they are listed on the stock exchange or belong to the financial sector. And finally, from the 2026 financial year, small and medium-sized companies from the category of listed companies as well as banks and insurance companies will be included. These small and medium-sized companies can choose whether they want to start applying the new rules two years later, i.e. only from the 2028 financial year. According to the WPK, the largest increase in the group of those affected should take place in the 2025 financial year.
Who should check and pay for this?
According to the EU Sustainability Directive, the auditor of a company who was previously responsible for auditing the balance sheet should also be responsible for examining his client’s sustainability reports. However, the CSRD gives EU member states an option to allow companies to also engage another auditor or an alternative assurance provider to carry out the sustainability assessment. The Chamber of Examiners WPK thinks little of this right to vote. Chamber President Dörschell justifies this not only with the qualification of the auditors, but also with the content-related connections between the classic balance sheet audit and the sustainability audit. The local auditing industry is well equipped for this task despite high workloads and a lack of skilled workers.
How much effort and what additional costs does the reporting and auditing obligation mean for small and medium-sized companies? According to the Chamber of Auditors, the business of the company concerned is very important. The WPK must also prepare itself for the new reporting and auditing requirements, which is not as complex in the case of the chamber as in the case of a manufacturing company. “Companies have to put a lot of effort into their control and reporting systems,” Dörschell expects. It is not possible to put a general figure on how much the additional check of the sustainability reports will cost the customer. “But it is certain that it will not be in vain,” said the WPK President.
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