How Treasury is Integrated into Sustainability Reporting

Starting in 2025, the CSRD is expected to become mandatory for all large companies under accounting regulations. But how is treasury involved in sustainability reporting? The GACT asked eight of its member companies about this.

The Corporate Sustainability Reporting Directive (CSRD) is currently a widely discussed topic. This EU directive will fundamentally change the scope and nature of corporate sustainability reporting and – if it is successfully transposed into national law in time – will be mandatory for all large companies in Germany in terms of their 2025 financial year in 2026, with a reporting requirement.

Many companies are already dealing with this topic intensively. Given its far-reaching implications, the German Association of Corporate Treasurers (GACT) has decided to address the CSRD and its impact on sustainability reporting. In September and October 2024, the association surveyed eight larger, capital market-oriented GACT member companies about the role of treasury in sustainability reporting according to the EU taxonomy, CSRD and ESRS. These are the results:

Does the treasury actively manage ESG and the associated ESG risks?

Treasury does not actively manage ESG and ESG risks on a regular basis. In most cases, management is the responsibility of a specialised department (Sustainability, Corporate Responsibility, etc., hereinafter referred to as the Sustainability Department).

Treasury is only involved in exceptional cases when ESG criteria or KPIs are considered in financial instruments (with regard to achieving targets) or when financial risks are to be reported in the context of sustainability reporting.

What texts and data does the treasury provide for sustainability reporting?

As a rule, treasury does not actively contribute to sustainability reporting. An exception to this is when financial data is required for the sustainability report. This could be the case when reporting on a green finance framework or ESG-oriented financial instruments.

What ESG metrics does the treasury calculate, for example on ESG risks or the financial transformation process?

Treasury does not calculate any ESG metrics itself. It is recommended that industry-specific, comprehensible and pragmatic metrics be selected for ESG-linked financial instruments from existing reports, which can also be controlled by the company.

Which transactions does sustainability reporting cover and include?

In general, this includes green finance frameworks, ESG-linked transactions (and the KPIs used in these) and use of proceeds such as green bonds and Schuldscheindarlehen, and in some cases specialised lending for wind farms and similar.

The topic of CO2 certificates is currently not usually the responsibility of treasury, although treasury is sometimes involved, for example in corresponding derivatives or in providing technical support for CO2 trading.

The topic of supply chain is usually not dealt with in treasury.

For what purposes does treasury use the sustainability report?

Treasury uses data from the sustainability report primarily for communication with banks and (debt) investors and – if available – for the green finance framework and the design and monitoring of ESG-oriented financial instruments. The report is also partially used for analyzing and managing financing-related ESG risks and for the treasury strategy.

When communicating with banks and investors and with credit rating agencies, the Treasury department (possibly together with Investor Relations) is responsible for discussing ESG issues – often with the involvement of the sustainability department.

Communication with ESG rating agencies is primarily the responsibility of the sustainability department. Treasury only takes the lead in communication when a Second Party Opinion (SPO) is commissioned for financing purposes.

What does a treasurer need to know about taxonomy, CSRD and ESRS?

As a rule, a basic understanding of taxonomy and CSRD and EFRS is sufficient. In addition, knowledge of the links to financing management, links to strategy and risk management in finance, and in-depth knowledge of ESG financing is useful.

In conclusion, sustainability reporting becomes increasingly important for Treasury as more ESG-related financing instruments are used, the greater the importance of ESG-oriented investors for corporate financing and the more significant ESG risks are for the company.

Due to the necessary investor communication, listed companies are more involved with ESG topics and the corresponding reporting than companies with pure credit bank financing. Large companies have a different staffing structure for ESG issues than smaller companies and can locate reporting in specialised departments such as accounting and sustainability. In smaller companies, the treasury, controlling and accounting departments are often so understaffed that all employees in these areas have to deal with ESG issues and the sustainability report.

Prof. Dr. Heinrich Degenhart & Sabine Paulus