CSR-RUG: More effort, more attention

It’s a small step towards sustainability, and it has now been implemented by the vast majority of companies obliged to do so: they have based their reporting systems on the requirements laid out by the so-called CSR-RUG.

Under this law German capital market-oriented corporations, banks and insurance companies above a certain size are required for the first time to disclose any information relating to environmental, social and labor matters, respect for human rights and the fight against corruption and bribery.

The correct title of the law reads: “Law to strengthen the non-financial reporting of companies in their situational and group management reports (CSR Directive Implementation Act)”. It came into force in April 2017 and has taken the place of an EU directive in Germany.

So far so good.

The research and consulting company imug recently organised a semnar in Hanover in order to take stock of how the affected companies have been addressing the new law. The initial evaluation of a number of studies on the topic showed that a large majority of companies basically support the new law (78 percent).

STRIKING A BALANCE

At the same time, many of them say that the resulting tasks have brought with them a considerable increase in effort, especially since staff levels usually have not been increased. Measured by the amount of public attention that sustainability issues have been receiving however, the effort may have been worthwhile. After all, participants of the seminar reported that supervisory boards had grown more concerned about the global responsibility of their own companies. This coincided with imug’s findings from the research.

HUMAN RIGHTS AS A CHALLENGE

In terms of what the new law actually entails, a number of companies encountered various difficulties. They had to build an awareness with regard to their key points of business in relation to issues such as the environment, employee matters, human rights and corruption, and what risks these themes pose to their operations. Often, the companies didn’t have any relevant figures (KPI) with  which these issues could be quantified. A particular challenge, according to the imug evaluation, was the area of human rights. Little wonder maybe, as supply chains must be scrutinised and checked, which – depending on the area of business – can include countless different production steps.

It remains to be seen whether the law has been an effective first step. At least a number of participants at the seminar – mostly employees responsible for the implementation of the law – reported that it was a help. The argument ‘this is mandatory now’ made it easier to persuade colleagues from other departments to heed their reporting obligations, they said. Another positive aspect that came up was the fact that CSR-RUG had provided a structure for the reporting process in many companies – they dealt more systematically with sustainability issues.

IGNORANCE ENTAILS HIGHER RISKS

imug also emphasized in its seminar that, indepentent of the new law, stakeholders increasingly demanded non-financial reporting: for example, it said, investors were more likely to be interested in how companies are positioned. Critical media and NGOs posed greater risks to those companies that didn’t care about sustainability, while employees increasingly searched out jobs which allowed them to keep a clear conscience. Ultimately consumers also became increasingly sensitive to environment and social issues.

It seems as though in spite of its cumbersome name, the CSR-RUG could become another building block in the promotion of sustainability.