How does Deutsche Post DHL Group implement the CSRD?
Our analyst Kathrine Link spoke to Dr. Klaus Hufschlag, Senior Vice President Sustainability Reporting at Deutsche Post DHL Group and member of the Sustainability Reporting Technical Expert Group (SR TEG) at the European standard setter EFRAG. We wanted to know which steps Deutsche Post DHL Group is taking to prepare for the Corporate Sustainability Reporting Directive (CSRD) and what hurdles companies will face due to the CSRD.
Dr. Hufschlag, what role did you play in the creation of the European Sustainability Reporting Standards (ESRS)?
In the Sustainability Reporting Technical Expert Group – this is the group of experts at EFRAG that advises on the draft standards and prepares them as recommendations to the European Commission – I represent the side of the report creators from business practice. I come from the finance sector myself, traditionally from accounting and controlling; However, I had my first contact with the topic of ESG reporting back in 2008, when we started to set up the CO2 accounting of the Deutsche Post DHL Group in the finance department. Over time, we added more sustainability metrics to our financial system. When we set up our current ESG roadmap at Deutsche Post DHL Group in 2021, the entire sustainability reporting was finally combined in my finance department. Against this background, as a practitioner, I also wanted to help develop the European standards for sustainability reporting in the EU. It is important to me to formulate the requirements of the ESRS in such a way that they are practical for companies. After the submission of the ESRS to the EU Commission, I can say that this has been largely successful – all disclosure requirements (DRs) can be implemented on their own, albeit sometimes not easily. All in all, however, there are still many requirements that companies are facing.
How is Deutsche Post DHL Group preparing to meet these requirements? What are the hurdles?
The most important message is that time is ticking – the first reporting year for us is already 2024. We have therefore started to prepare for reporting according to CSRD. The first step is the conversion of our ESG materiality analysis, previously based on the GRI standard, to the requirements of the ESRS. The materiality analysis examines which ESG-related effects the company's activities have and which ESG risks and opportunities exist for the company. On this basis, it is then determined which ESG topics are 'material' and therefore relevant for the company's reporting. At the same time, we are already analyzing where we still see gaps in our reporting. In concrete terms, this means that we primarily look at which key figures are required compared to our current sustainability reporting, and organize the structural and organizational processes for the necessary data flows and measures in order to guarantee good data quality.
Stakeholders play an important role in the CSRD materiality analysis. How do you involve the silent stakeholder “nature”?
The inclusion of nature as a 'silent stakeholder' is an innovation in sustainability reporting and represents both a challenge and an opportunity: It requires a conscious examination of the current state of science and research in environmental issues. Larger companies with broad internal technical expertise are often already well positioned here. However, many medium-sized and smaller companies are likely to face many challenges here, as only a few people in the company have the necessary specialist knowledge – here the companies will probably often have to resort to external support. At the same time, however, the approach offers the possibility of including more objective scientific standards in addition to the opinions and moods of the classic stakeholder analysis.
How important is the sustainability report for stakeholders such as lenders and investors?
Investors and lenders are important stakeholders for companies. In the case of the ESRS with double materiality, they have at least an interest in financial materiality. However, strategically thinking investors also know that financial materiality on the one hand and social materiality on the other are in a long-term interrelationship. Sustainability reporting is therefore very relevant to these players – and investor interest in sustainable and ESG investing continues to grow.
Which standard will be the most difficult to implement?
For many companies, the biggest challenge will be social standards. For example, the own workforce standard (ESRS S1 Own Workforce) goes beyond own employees and includes temporary workers and 'dependent self-employed'. If data has to be reported beyond company boundaries, however, we reach the limits of what is feasible for the company. For this reason, EFRAG has already restricted the reporting obligation to its own employees for individual social DRs.
And companies will also encounter practical hurdles in the operationalization of many key figures of the S1 standard: As soon as a company is active in several countries or currency areas, the processes become complex. Not only do different local circumstances, such as different social systems or differences in purchasing power, have to be taken into account for a meaningful determination of the key figures, but also different national data protection regulations make it difficult to pass on and sometimes collect the required data. Here the EU Commission will have to support companies with pragmatic assistance in order to enable meaningful and comparable reporting.
Can you give us an outlook on how sustainability reporting will change in the future?
I myself come from the finance sector and have witnessed some development loops that financial reporting had to turn around. Sustainability reporting will also go through such a maturing process. We will see an evolution in companies that will have a major positive impact on the environment and society. However, there will also be some areas where simplifications in reporting will later become necessary – be it to remain compatible with international standards or for cost-benefit reasons. The actual focus should not be on reporting, but above all on implementing the measures for a sustainable economy.
Dr. Hufschlag, thank you for the interview.
About the person: As a member of the Sustainability Reporting Technical Expert Group of the European Financial Reporting Advisory Group (EFRAG), Dr. Klaus Hufschlag worked on the creation of the European Sustainability Reporting Standards (ESRS) for the CSRD. As Senior Vice President of Deutsche Post DHL Group, he is responsible for ESG reporting and sustainability controlling at Deutsche Post DHL Group.
CSRD: The Corporate Sustainability Reporting Directive is the legal basis for the European Sustainability Reporting Standards (ESRS) and extends existing rules for non-financial reporting. The new guideline follows a double principle – companies must record the effect of sustainability aspects on the economic situation and the social and ecological impact of the company.
EFRAG: The European Financial Reporting Advisory Group is responsible for the development of the European Sustainability Reporting Standards (ESRS).
ESRS: European Sustainability Reporting Standards are intended to make sustainability reporting by companies in the EU more precise, uniform, consistent, comparable and standardized – just like financial accounting and reporting. Current drafts contain 82 disclosure requirements (DRs).