Between mandatory and voluntary: non-financial reporting by German companies

Non-financial reporting by German companies has long been a voluntary matter. As of fiscal year 2017, the CSR Directive Implementation Act makes it mandatory for some 500 large German companies. This article identifies the trends and developments in voluntary reporting based on an analysis of the quality of sustainability reports published by German companies from 2014 and 2015. The number of stand-alone sustainability reports and integrated reports is increasing and companies are orienting, in particular, on the guidelines provided by the Global Reporting Initiative. We find that there is room for quality improvements. Moreover, we show that many reports from companies that are new to reporting are still incomplete in terms of content. We additionally conduct an analysis of non-financial information presented by 522 German companies during financial year 2015 or 2016 that are now subject to reporting requirements starting with financial year 2017. The study shows that many reports still need further development to meet the requirements of the CSR Directive Implementation Act. Specifically, a more rigorous selection and linking of financial and non-financial information is necessary while other areas for improvement include the descriptions of the policies in use for tracking the relevant matters as well as for handling of risks. The analysis of the current non-financial information also shows that the quality and depth of sustainability-related information is generally greater in stand-alone reports oriented to frameworks such as the GRI4 or the German Sustainability Code than in management reports.