Voluntary sustainability reporting is favoured by 62% of small and medium enterprises (SMEs) according to an ESG study.

Voluntary sustainability reporting is favoured by 62% of small and medium enterprises (SMEs) according to an ESG study.

German Medium-Sized Companies Advance Sustainability Strategy Amid Challenges

A new study by Grant Thornton AG Wirtschaftsprüfungsgesellschaft and YouGov Germany reveals that the majority of mid-sized companies in Germany recognize the importance of sustainability, with 93% considering it essential or rather important [1]. However, these companies face numerous challenges in implementing and managing Environmental, Social, and Governance (ESG) initiatives.

The study, conducted online in June 2025 with around 580 decision-makers in medium-sized companies in Germany, questioned companies about topics such as drivers of sustainability reporting, ESG readiness, the current status of dealing with regulations, and challenges and ambitions around ESG [1].

Key drivers for sustainability and ESG initiatives in German medium-sized companies include:

• Regulatory compliance: The Corporate Sustainability Reporting Directive (CSRD) and related EU mandates are compelling companies to adopt extensive sustainability reporting and risk management practices, affecting even medium-sized firms through amendments to commercial and securities laws [1].
• Market and investor expectations: Investors and banks are adjusting their criteria to emphasize ESG risks and opportunities, making transparent ESG metrics essential for financing and stakeholder confidence [2][3].
• Strategic alignment with global climate goals: Many companies, inspired by the Paris Agreement and SDGs, prioritize achieving net-zero and decarbonization targets, embedding sustainability as a core strategic dimension [3][5].

Opportunities for these companies include:

• Improved risk management and resilience: Tools like ESG assessment models and scenario analyses (e.g., climate stress tests) help anticipate and mitigate environmental and social risks, improving long-term viability [2].
• Access to sustainable finance: Demonstrating positive ESG impact can facilitate better access to funding and financing from banks and investors that prioritize sustainable business practices [2].
• Innovation and competitiveness: Integrating circular economy principles and resource efficiency can open new markets and strengthen value chains [5].
• Enhanced stakeholder trust: Transparency and active engagement foster credibility with customers, employees, and regulators, aiding reputation and compliance [2][5].

Challenges faced by medium-sized German companies include:

• Complex and evolving regulatory landscape: The 1:1 transposition of CSRD into German law, combined with omnibus regulation packages and delayed implementation schedules, demands significant adjustments in compliance systems and reporting, with limited flexibility [1].
• Data availability and management: Capturing, managing, and analyzing comprehensive ESG data at various organizational levels remains difficult, especially for companies with fewer resources [2].
• Balancing economic and sustainability goals: There is ongoing tension in aligning business growth strategies with costly sustainability investments, especially as sustainability is sometimes deprioritized in executive agendas [3].
• Global competitive pressures: German companies face challenges from divergent international standards and the need for a level playing field, requiring strong European coordination to avoid competitive disadvantages [3].

The high complexity of existing ESG criteria and standards (44%) and the lack of clear regulatory guidelines (39%) are the biggest barriers to implementing ESG projects in companies [1]. However, many companies are aiming to significantly increase their ESG ambitions in the next five years to become new "front runners" (27%) [1].

Efficient sustainability reporting supports companies in identifying optimization possibilities and addressing risks to their business model proactively [1]. Voluntary reporting on sustainability enhances credibility and transparency in the market and is a genuine competitive advantage [1]. Grant Thornton AG Wirtschaftsprüfungsgesellschaft, one of the ten largest auditing firms in Germany, offers expertise in Audit & Assurance, Tax, Advisory, and Legal services to assist companies in navigating these challenges [1].

[1] Grant Thornton AG Wirtschaftsprüfungsgesellschaft together with YouGov Germany, "ESG and Sustainability in the SME sector 2025" (June 2025). [2] European Commission, "Corporate Sustainability Reporting Directive" (2019). [3] European Parliament, "Proposed Regulation on the Establishment of a European Single Access Point for Sustainability-Related Disclosures in the Financial Services Sector" (March 2022). [4] Grant Thornton AG Wirtschaftsprüfungsgesellschaft, "About Us" (n.d.). [5] European Commission, "A European Green Deal" (December 2019).

1. In order to meet regulatory compliance and attract investors, many medium-sized German companies in the environmental-science sector are seeking ways to enhance their sustainability and ESG initiatives, aligning their strategies with global climate goals and improving risk management.
2. Despite the opportunities for medium-sized German companies in finance and business, challenges such as the complex and evolving regulatory landscape, data management issues, balancing economic and sustainability goals, and global competitive pressures persist, necessitating expert assistance from firms like Grant Thornton AG Wirtschaftsprüfungsgesellschaft.

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