Study on climate management in the DACH region: CSRD is having an impact

• 90% of companies have their own climate strategy.
• 80% of companies have already carried out a climate scenario analysis.
• Emissions in Scopes 1 and 2 have fallen significantly in the last four years, but only by 4% in Scope 3
• The financial sector is recording financed and insured Scope 3 emissions for the first time
• CSRD regulation is effective - despite the lack of a legal basis
• Reduction rate not sufficient to reach the 1.5° target

The majority of companies in the DACH region have already taken important steps towards adequate climate management in the face of worsening climate change and the associated environmental, social and economic implications as well as new regulatory requirements. This is shown by a recent study on non-financial reporting by the Hamburg-based communications and strategy consultancy for financial communications and ESG Kirchhoff Consult, which looks specifically at the companies listed in the top DAX40, ATX and SMI indices. According to the study, nine out of ten of the companies surveyed have a climate strategy. The majority also report on the current degree of target achievement with regard to the climate targets they have set. As required by CSRD and ESRS, more than 80% also report on the implementation of a climate scenario analysis and the examination of physical and transitory climate impacts.

In a comparison of the years 2021 to 2024, companies with specific climate strategies and reduction targets validated by the SBTi were able to demonstrably reduce their greenhouse gas emissions to a greater extent. The voluntary commitment to science-based climate protection targets and transparency of strategic approaches is most evident in ATX companies and in the technology & communication and consumer goods sectors. In contrast, the financial sector and the transportation sector still have some catching up to do.

"The results of this year's study show that many of the largest companies in Germany, Austria and Switzerland have laid important strategic foundations and made initial progress. On the other hand, it is clear that this development is not sufficient across the board to meet the requirements of the globally agreed 1.5° target as an economic region," says Dr. Jan-Ole Brandt, Director ESG/Sustainability at Kirchhoff Consult and co-author of the study.

Major reduction successes in Scope 1 and 2 emissions

The companies' reporting analysed showed sharp declines in Scope 1 (-31%) and Scope 2 (-46%) in the period from 2021 to 2024. However, these are often due to comparatively simple measures such as the purchase of green electricity. In the area of upstream and downstream value chains (Scope 3), on the other hand, which accounts for the majority of emissions at an average of 88 %, the smallest reduction successes were recorded at just 4 %.

Improved data situation puts Scope 3 developments into perspective

However, the reported emissions data in connection with new regulatory requirements such as the ESRS were increasingly influenced by methodological enhancements. At first glance, there were massive increases in the financial sector in particular, as extensive Scope 3 categories such as financed or insured emissions (Scope 3.15) were included in the accounting for the first time. "This drastically increases the emission values on paper. However, this primarily indicates an improved data situation or increased transparency, and not a real increase in emissions," says Brandt. In connection with the discussions surrounding the CRSD, the European Central Bank (ECB) recently warned against a softening of reporting obligations and emphasized the importance of transparency and comparable ESG data for financial stability and adequate risk management.

The improved data situation puts the comparison of emissions figures with previous years' figures and the slower reduction in the overall view into perspective: while emissions were still reduced by around 5% between 2021 and 2022 according to the reported figures, the reduction fell to just 3% in the following year.

Overall, the development of the reported carbon footprints shows that important steps have been taken and obvious reduction potential has already been realized. More complex, structural measures are now required. If the rate of reduction remains at the observed level (-1.5 % per year), the annual target of at least 4 %, which is required to meet the 1.5 °C pathway according to the IPCC, would be clearly missed.

CSRD regulation is effective – despite the lack of a legal basis in Germany

The EU's CSRD Directive should have been transposed into German law last year. Large companies in Germany would have been obliged to report on their sustainability issues to a much greater extent in their annual reports for the 2024 financial year. But the law did not come into force. The situation is similar in Austria, as the required implementation law has not yet been passed here either. In Switzerland, many corporations will be affected by the CSRD in the coming years through subsidiaries or shares of turnover. “Nevertheless, the major companies in the DACH region have already largely aligned themselves with the new requirements of the CSRD and ESRS in their reports for the 2024 financial year, thus providing greater clarity,” summarizes co-author Liz Gacon.

A new draft bill on CSRD implementation in Germany has now been available since July 10. The draft suggests that the law will still take effect in 2025.

The complete study #1 Climate management in the DACH region: between regulation and true commitment. Non-financial reporting in DAX40, ATX and SMI is available here. (available in German only).

ABOUT KIRCHHOFF CONSULT

With around 70 employees, Kirchhoff Consult is a leading communications and strategy consultancy for financial communications and ESG in German-speaking countries. For more than 30 years, Kirchhoff has been advising clients on all aspects of financial and corporate communications, annual and sustainability reports, IPOs, investor relations and ESG and sustainability communications. 'Designing Sustainable Value': Kirchhoff combines content expertise with excellent design to create sustainable value.

Kirchhoff Consult is a member of TEAM FARNER, a European alliance of partner-led agencies. The common goal: to build the European market leader for integrated communications consulting.

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