- New, mandatory EU regulations are increasing the effort of collecting and reporting sustainability data for large companies and financial institutions.
- ESG-based assessments of suppliers and borrowers hit SMEs especially hard.
- Open data hub openESG offers secure and comprehensible data collection and reduces effort for all parties involved.
Munich/Kassel/Darmstadt. ESG regulation specialists from Envoria, FinTech company fino and technology and outsourcing service provider PPA Technologies GmbH (PPA) are pooling their core competencies in the jointly founded openESG GmbH. The aim of the new company is to support financial service providers in implementing ESG regulations as a result of the European Green Deal and to relieve large companies of the burden of assessing their supply chains. To this end, openESG provides a central, open data hub for the collection, management and enrichment of relevant data.
With the Green Deal, the European Union has launched a whole host of regulations and rules to support the EU’s defined climate targets and prevent “green washing”. What in the past was treated as a secondary issue under the heading of Corporate Social Responsibility (CSR) has been significantly tightened up with the published ESG (Environment, Social and Governance) regulations. For German and European businesses, this results in comprehensive reporting and disclosure obligations that must be met from the 2023 reporting year.
The first stage is the EU Taxonomy Regulation, which has been in force since the 2021 reporting year and requires disclosure of what proportion of a company’s sales, investments and operating expenses are sustainable. As the first stage, which is comparatively easy to implement, this applies to capital market-oriented companies with more than 500 employees – in figures: 550 companies in Germany and 11,700 in Europe.
From the 2023 reporting year, the next stage of ESG regulations will follow, the Corporate Sustainability Reporting Directive (CSRD), which applies to companies with 250 or more employees, which will then already affect around 15,000 companies in Germany and over 50,000 in Europe. The EU’s recently published proposal includes over 300 key figures that every company must record and report, which represents a significant increase in reporting obligations.
In addition, when the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) comes into force, large companies with more than 3,000 employees will have to record ESG indicators for their entire supply chain from January 2023. No less affected are financial companies, such as banks and savings banks, asset managers, insurance and reinsurance companies, which must report the sustainably financed business volume as a proportion of the total business volume. This so-called green asset ratio is only the first stage of disclosure requirements, which will be followed by others in the coming years.
In conclusion, the ESG regulations that have been adopted and are planned will lead to considerable additional effort. This applies not only to directly affected larger companies, but also to a large number of small and medium-sized enterprises (SMEs) via supply and financing relationships. In practice, this means that SMEs have to provide different ESG information for almost every one of their business and financing relationships, even though they are not directly affected by the regulations.
Central data hub to avoid additional bureaucratic effort
“In order to reduce this additional work for all parties concerned, it was necessary to create an open, independent data hub that would map the complex process of data collection in a legally secure and comprehensible way,” says Michael Sindram, Managing Director of fino ventures GmbH. “This was exactly the motivation for the foundation of openESG. Instead of time-consuming, multiple data entry in different forms, openESG simplifies and bundles the provision and use of data with comprehensive data protection and approval processes.”
As an open, independent data hub, the legally compliant and audit-proof process is made available to all participants as a service. Users are guided through each step of the data collection process by easy-to-understand explanations. The required familiarization with the complex subject matter is significantly reduced.
The know-how for meeting the various requirements comes from the ESG specialists at Envoria. This solution, which is certified by the GRI (Global Reporting Initiative) and has been tried and tested in both SMEs and large corporations, can be flexibly adapted to specific requirements and subjects all data entries to comprehensive logic checks. The effort required is also drastically reduced for companies that are affected as borrowers from banks or as part of the supply chain of large corporations. Required environmental, social, and governance data need only be provided once through matched questionnaires and can then be shared with any number of stakeholders. “It is worth emphasizing that the data hub operates openly and independently. SMEs remain owners of their sensitive data and can decide on a case-by-case basis which information they disclose to which addressees,” emphasizes Heimo Saubach, Managing Director and shareholder of PPA Technologies GmbH.
Sven Schubert, CEO and co-founder of Envoria, adds: “There is still a great deal of uncertainty among banks and large companies with regard to compliance with the new requirements. With 20 ESG experts, many with auditing backgrounds, we are adapting content and processes to the evolving regulatory environment. We ensure that every questionnaire in the openESG hub complies with the legal requirements. This means that, in addition to the parties directly affected, SMEs and their tax advisors in particular benefit, as they can access tried-and-tested tools and use them in a targeted manner with their expertise. By collecting the required data only once and using our digital assistance, we expect a reduction in effort for companies of up to 80%.”
Further information on openESG: www.openESG.de
About Envoria (Financial Software Architects GmbH):
Financial Software Architects GmbH launched in Munich in 2018 and supports companies in meeting disclosure requirements around new sustainability standards under the EU Green Deal. Envoria offers an all-in-one software that maps standard frameworks (GRI, ESRS, SASB, DNK, EMAS), enables CO2 emissions calculations (Scope 1, 2 and 3) and implements regulatory requirements of EU taxonomy calculations.
DAX-listed companies as well as well-known corporations in the European Union have opted for Envoria. Envoria has established close partnerships with audit firms and consultancies to ensure that regulatory changes and new audit requirements lead to immediate implementation in the software.
Further information: envoria.com
About fino ventures GmbH:
fintech company fino was founded in Kassel in 2015 and is a provider of innovative B2B SaaS business models. fino develops solutions that inspire people and sets standards through digital and data-based business models in the areas of bank account mining (FinTech), invoice management, document analysis (DocTech), KYC/money laundering (RegTech) and property tax (TaxTech). Through fino ventures, fino is continuously expanding its data ecosystem through strategic investments and provides entrepreneurial support to young startups as a mentor, business angel or impulse provider on all topics related to founding, business model and scaling.
Further information at: www.fino.group und www.fino.ventures
About PPA Technologies GmbH:
The PPA Group, founded in 2000, is the market-leading service provider for the digitalization of financial information for the financial industry. The two national companies PPA Ges. für Finanzanalyse und Benchmarks mbH in Darmstadt/Germany and Glattbrugg/Switzerland perform automatic data recognition, data extraction and customer-specific data preparation in a classic outsourcing service and are closely integrated with their systems and processes into the corporate finance processes at banks. This competence is currently extended by the processing of non-financial information (ESG). PPA employs approx. 150 people at both locations and currently processes approx. 300,000 analysis-relevant documents per year. PPA works across sectors for private banks, public and cooperative institutions and meets all regulatory requirements for the outsourcing of business processes by banks in Germany and Switzerland.
Further information at: www.ppaworld.com