Sustainability Management System

Sustainability Management System: A Safeguard for Integrated ESG Processes and Audit-Proof Reporting

From the 2027 financial year, large companies will be obliged to prepare their sustainability reports in accordance with the requirements of the Corporate Sustainability Reporting Directive (CSRD). Binding European reporting standards (ESRS) form the basis for this reporting. Small and medium-sized enterprises (SMEs) with fewer than 1,000 employees can use the VSME standard. It is a great advantage for SMEs to voluntarily provide sustainability-related information. Proactive reporting helps to create transparency in the supply chain and for products, to meet regulatory requirements and developments at an early stage and to strengthen their own competitiveness in the process.

New Sustainable Business Practice Requirements: What Challenges Do Companies Face?

Sustainability management is complex. Amid the jungle of ESG (environmental, social, and governance) guidelines and rising stakeholder demands, even businesses with a social and environmental focus can lose track. Often, there is a lack of know-how and time to establish and consistently pursue the topic. It can feel overwhelming.

However, those who neglect these responsibilities face significant risks. Those who do not provide reports on sustainable corporate aspects may face penalties, and there could be reputational damage with customers, partners, competitors, and employees. Their market position may even be jeopardized.

How Can Businesses Respond to These Challenges?

In order to meet rising expectations and provide sufficient information, we recommend embedding sustainable business practices into your company’s structures now—meaning they should be adopted systematically. While this may sound abstract, concretely, it means that these practices must become part of everyday operations.

What Function Does a Sustainability Management System Have for Businesses?

A sustainability management system (SMS) is a management approach, not software as you might expect. It is part of an integrated management system that enables the monitoring and management of all aspects of sustainability. With an SMS in place, companies can more quickly identify the rules they must follow, set sustainability targets, and launch sustainability initiatives. As a result, they create the operational conditions necessary for a successful transformation.

How Do Companies Satisfy Their Reporting Obligations and Set Up for a Sustainable Transformation?

Für Unternehmen ergeben sich fünf Handlungsfelder:

1. Assessing the Reporting Obligation

Does the Corporate Sustainability Reporting Directive (CSRD) require companies to prepare a sustainability report? Does it require them to report on the opportunities and risks associated with their products and processes, as well as the human and environmental impacts of their ecological, social, and business practices? Organizations are impacted if they fulfill the following criterion:

>1,000 employees

If the answer here is yes, then it is time to take action.

2. Safeguarding Reporting Capabilities

Can the company prepare ESG reports in accordance with standards (e.g. DNK, VSME, ESRS, GRI, CDP)? What data and information are already available, and what systems still need to be implemented? Be cautious: Unfiltered and uncontrollable metrics should not be made public, as this could present ESG performance in a more negative light than it actually is. The ability to consolidate collected data and information is crucial for effective reporting.

3. Expanding Competencies

It is critical that everyone in the organization understands the importance of sustainability, the benefits of sustainable practices, and—most importantly—how to achieve sustainability targets. This makes it essential for the relevant departments and teams to be properly trained. Raising awareness across the organization brings significant advantages, especially since sustainability is a continuous, long-term project.

4. Integrating Sustainability

Integrating sustainability into all processes requires effort, but the investment is worthwhile. Sustainable business practices are a key driver of comprehensive growth. It’s essential that these practices are implemented systematically and continuously. A sustainability management system enhances a business's resilience and increases its chances of maintaining a strong market position over the long term. Significant improvements can be made, even with the first few steps.

5. Optimizing

When the reporting is completed and the ESG statements submitted, the information and metrics remain valuable for unlocking internal potential and driving the organization’s progress. Using the data as a basis, you can precisely identify areas with untapped potential for optimization. Sustainability is made measurable and creates a foundation for comprehensive transformation. With our zero-emissions company approach, we help you to achieve your climate targets and tap into the potential of the green factory, green products, and the green supply chain.

Do You Want Support to Take On These Areas of Action Systematically?

Book your no-obligation initial consultation with our experts free of charge now and explore how a sustainability management system can take your company forward.

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Sustainability Management: How Can Ingenics Consulting Support You?

Ingenics Consulting helps its clients balance economics and ecology—pragmatically and to the right extent. Our services include strategic consulting in the area of sustainability management as well as operational support in the introduction and implementation of a customized sustainability management system. We place particular emphasis on empowering employees in order to ensure that sustainability is firmly anchored within the company.

Additionally, Ingenics Consulting supports the development of target concepts and the implementation of sustainable optimization measures, with a particular focus on reducing emissions through our 'zero-emissions company ' approach. Systematic sustainability management provides the best foundation for continuous improvement toward becoming a sustainable organization.

Our consultants have a deep understanding of production and value creation processes, while also keeping track of upstream and downstream processes outside the company. To implement ESG requirements, they use a structured, modular approach that has proven successful time and again. These modules allow our clients to begin in a way that aligns with their individual maturity.

Ingenics Consulting safeguards its clients’ reporting capabilities in four steps:

1. Stakeholder Analysis and Double Materiality Assessment – To create a stakeholder matrix and a customized list of ESG topics, providing a comprehensive view of the bigger picture.

2. Sustainability Process Mapping and Design – To analyze impacts across the process chain, define areas for action and required resources, and plan for implementation.

3. Implementation and Realization – To establish a robust process structure, including the adaptation of ESG processes and ensuring report quality.

4. Empowerment of Organization, Supplier Support, and Task Force – This includes evaluating suppliers, supporting the development of a comprehensive management approach, and assisting with external audits (e.g., ISO, EcoVadis).

FAQs about Sustainability Management and ESG Topics

What Is a Sustainability Management System?

A sustainability management system is an integrated approach that manages all aspects of sustainability. It helps companies define the rules they must follow, set targets, and meet their reporting obligations. It seamlessly fits into existing management structures and serves as the foundation for a sustainable transformation.

What Is a Double Materiality Assessment?

The double materiality assessment identifies the ESG topics and sub-topics that are relevant to the organization and must be considered. It is called 'double' because it evaluates two perspectives: first, the impact of business activities and products on sustainability aspects, and second, the economic opportunities and risks for the company. The ESRS make the double materiality assessment a requirement.

Why Do I Need ESG Reporting?

ESG reporting meets stakeholder expectations, as investors, customers, employees and other stakeholders demand increasing transparency and reliable reports on environmental, social and governance aspects. Comprehensive ESG reporting helps companies to build trust with stakeholders, strengthen their reputation and improve access to capital.
ESG reporting is also part of annual economic reporting. It shows sustainability-related measures taken by companies, environmental and social impacts, as well as the resulting financial risks and opportunities. From January 1, 2027, CSRD reporting will be mandatory for large companies. Specifically, a company is subject to the CSRD reporting obligation if it meets the following criteria: more than 1,000 employees, a turnover of more than 50 million euros or a balance sheet total of more than 25 million euros. The reporting can be audited by auditors. Non-compliance may result in sanctions.