From regulatory chaos to ESG excellence

The pile of regulations and legal texts that pile up on employees' desks and put them under increasing pressure grows every day: CSRD, ESRS, EU Taxonomy, CSDDD, CBAM and many more. Each abbreviation stands for a complex set of rules that must be complied with in order to meet the growing demands for sustainability and transparency.

Frida struggles in the midst of this regulatory jungle. The newly appointed Sustainability Manager is almost overwhelmed by the flood of regulations and required data points, but she quickly realizes: The Corporate Sustainability Reporting Directive (CSRD) specifies which companies will be obliged to report on sustainability from 2024 - and exactly how this must be structured. But that's not all. The European Sustainability Reporting Standards (ESRS) provide a strict framework for reporting in the areas of environmental, social and corporate governance. An ESG report, such as the one Frida has to produce, should meet all these requirements and at the same time reflect the company's genuine commitment to sustainability.

Time is pressing, resources are scarce and the data situation is patchy. As if that were not enough of a challenge, the EU's Carbon Border Adjustment Mechanism (CBAM)[1] has been added to the mix. This mechanism is intended to ensure that a fair price is levied on carbon emissions resulting from the production of carbon-intensive goods outside the EU. Its aim is to protect companies within the EU that adhere to strict climate standards, while cheaper, emissions-intensive imports - from China, for example - become correspondingly more expensive.

In the maelstrom of sustainability

While Frida thinks about her next steps, she feels overwhelmed by the multitude of regulations and requirements. She realizes how important clean and transparent data is to prevent greenwashing allegations. According to Gartner[2] , misleading or exaggerated sustainability claims, known as "greenwashing", may appeal to stakeholders in the short term, but lead to liability risks, high costs and reputational damage in the long term. Frida thinks of Theo, the former CEO of her company. Some time ago, he faced the same challenge. In his quest to achieve quick results, he initiated an ESG report that was sloppy and inaccurate. Missing data was ignored, existing data was glossed over. An audit revealed the discrepancies, which led to serious consequences: The company lost the trust of investors and customers, negative media coverage followed, and Theo had to stand trial for compliance violations. His career and reputation were permanently damaged.

In the long term, ESG reports will be audited much more strictly: While a "limited assurance" is currently sufficient, the higher "reasonable assurance" will often be expected in the future - a more intensive review that places much stricter requirements on data quality.[3]

Frida realizes that data integrity is the key to success. She decides not to go down the "dirty" route and instead to take a comprehensive approach to procurement - an approach that will benefit both her company and her career in the long term. One crucial aspect that Frida realizes is the importance of quality and availability. Without accurate and reliable data, there is not only the danger of greenwashing, but also the risk of making strategic mistakes. The steering of the company's sustainability strategy is based on the information that flows into the ESG report. A comprehensive and transparent ESG report is only possible if the data sources are dependable and all relevant information is recorded. The double materiality analysis[4] is an essential basis for this process, in which both the financial impact on the company and the company's impact on the environment and society are considered. It ensures that, in addition to financial aspects, environmental and social impacts also guide the reporting obligations. Not only what costs money is relevant, but also what pollutes the environment or promotes social inequality.

The path to data procurement

Frida resolutely invests in a new reporting tool, but her initial hope quickly gives way to disillusionment: although the tool already offers initial structures, it lacks the necessary data to make meaningful use of it. An urgent question arises: How can she acquire it?

The challenge spans many departments - information from accounting, IT, logistics and production must be obtained. Frida knows that without complete and reliable data, there is a risk of publishing inaccurate or misleading information. However, she often fails due to the incomplete documentation of internal processes. Despite her in-depth knowledge of the CSRD guidelines and intensive discussions with sustainability experts from other companies, she still lacks the necessary data to map all company processes in a compliant manner. Information is scattered, sometimes difficult to access or simply not documented. Added to this is the instability and dynamic nature of the requirements: Regulations and requirements are constantly changing, which makes it even more difficult to create a consistent and comprehensive ESG report. She talks to department heads and tries to gain access to the required information, but often encounters resistance. She realizes that without a clear plan and external support, the ESG report would become a mammoth task. At that moment, Frida remembers a flyer she had seen at a sustainability congress: IBIS Prof. Thome AG, a company that specializes in preparing and supporting the collection and provision of data for the CSRD report - taking a clear ERP-centric approach, specifically with a focus on SAP systems. Without hesitation, she contacts the team. The IBIS employees listen carefully, ask specific questions and immediately understand the core problems Frida is facing. They explain how they can increase data availability, quality and reliability with the help of an ESG Preparation analysis that is seamlessly integrated into the existing IT landscape. All existing systems are used to ensure that they are captured and maintained directly where they are generated.

A particular advantage of this solution is the automation of reporting for subsequent years. Frida learns which functions and settings in the SAP system are suitable for ESG information, where meaningful data is already recorded in the system and how existing data gaps can be closed with the help of IBIS Best Practices. For the first time in a long time, Frida no longer feels alone with her challenge. The collaboration gives her new courage and shows her concrete solutions. She realizes that the key to success is not having to do everything alone but having the right partners at her side.

The solution

But despite the data it has collected, Frida faces the next challenge: how should it process all this information?

After all, mere availability is only the first step. They must be incorporated into the report in a structured and correct manner in order to meet the strict regulatory requirements and at the same time reflect the complexity of the company's processes. This is where the ESG Data Provider from IBIS Prof. Thome AG comes into play - a specially developed solution that automates the entire data processing process and makes it much easier for Frida to complete its ESG reporting.

This solution is not only designed to collect relevant data directly from the SAP source system, but also enables large volumes of data to be processed safely, quickly and precisely - even with the inclusion of external data sources. This flexibility saves valuable time and reduces sources of error. This method ensures that the results are always of the highest quality and are recorded directly where they are generated. This not only increases integrity, but also makes it easier to comply with complex requirements.

Thanks to the flexible interfaces of the IBIS application, the processed information can be seamlessly integrated into the company's various reporting tools via API. This flexibility minimizes the adaptation effort and ensures seamless integration into the existing IT landscape. Frida can be sure that all requirements are fully met.

A particular advantage of this ERP-centric solution is the automation of reporting for subsequent years. The tool provides a resilient and sustainable foundation by maintaining the data at its point of origin and thus creating a solid basis for future reporting.

With the support of IBIS, Frida succeeds in creating a report that is not only precise and compliant, but above all offers one thing: Transparency. The semi-automated processing along the ESRS standards ensures that Frida's ESG report is based on a verifiable and traceable foundation. The use of transactional data ensures that every statement in the report is traceable and that regulatory requirements can be reliably met. This gives Frida's companies the opportunity to present a clearly defined and transparent ESG performance that strengthens the trust of investors, customers and stakeholders.

But the tool doesn't just reduce the effort involved in reporting. The detailed analyses enable Frida to gain deeper insights into the company's ESG performance, including the evaluation of location risks via the Location Risk Assessment. For example, by combining risk indicators with the company's business process data, Frida identifies particularly vulnerable sourcing channels. The holistic data approach enables her to make well-founded statements about her company's risk situation and initiate appropriate measures such as detailed checks or risk mitigation strategies. Frida can make well-founded decisions, plan strategically and identify potential risks at an early stage. This transparency not only helps the company to continuously improve, but also to position itself on the market as a responsible and sustainable player in the long term.

Frida recognizes that the IBIS solution is not just a vehicle to meet regulatory requirements - it is a strategic application that helps her minimize risk while maximizing data quality.

The competitive advantage lies in the data

Frida's success impressively demonstrates that the difference between mere compliance and a real competitive advantage lies in the right combination of partners, tools and strategic data management. With a reliable foundation, it is not only able to meet legal requirements, but also to strengthen the trust of investors, customers and employees. The transparency provided by a transactional database creates credibility and shows that the company takes its sustainability promises seriously.

The future of ESG reporting is data-driven. Investing in robust systems and specialized expertise early on lays the foundation for sustainable and scalable reporting. Frida has shown that the integration of SAP-centric applications such as RBE Plus from IBIS, not only significantly increases data quality, but also automates and simplifies essential reporting sub-processes. This automation not only saves time and resources, but also ensures that the information is available in a form that can be easily used for both internal analyses and external audits and reports.

This is because clean, well-maintained data enables well-founded decisions, promotes innovation and strengthens confidence in the company's sustainability strategy. Companies that seize this opportunity gain a decisive advantage over their competitors and are able to grow successfully and responsibly in the long term.

[1] https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

[2] https://www.gartner.com/en/webinar/508859

[3] https://www.haufe.de/finance/haufe-finance-office-premium/abc-der-nachhaltigkeit-begrenzte-sicherheit_idesk_PI20354_HI15222892.html

[4] https://dfge.de/doppelte-wesentlichkeit-erklaert/