A DNK (Deutscher Nachhaltigkeits Kodex) Sustainability Code Reporting Explainer - Last Updated: August 8, 2022

What is the DNK (Deutscher Nachhaltigkeits Kodex)?

The DNK (Deutscher Nachhaltigkeits Kodex) ("The Sustainability Code" in English) is Germany's sustainability reporting standard governed and maintained by the German Council for Sustainable Development (Nachhaltigkeitsrat). The DNK is designed to make German corporate sustainability reporting more common, consistent, and standardized like financial accounting and reporting. The DNK is also closely aligned with the GRI (Global Reporting Index) sustainability and impact reporting framework.

A DNK-compliant sustainability report requires company disclosure across 20 different sustainability reporting criteria:

Who's Required to Submit a DNK Sustainability Report?

The DNK Sustainability Code was first designed in 2010 by the German Council for Sustainable Development, then revised in 2014. In 2017, the Bundestag (Germany's equivalent of Parliament or Congress) passed the "Act to strengthen non-financial reporting by companies in their management reports and group management reports" (CSR Directive Implementation Act), also known as CSR-RUG, into law. CSR-RUG aligns the DNK Sustainability Code with CSR-RUG's statutory reporting requirements. CSR-RUG is the law that applies the EU's Non-Financial Reporting Directive (NFRD) within Germany.

CSR-RUG and DNK reporting is intended for all German companies who:

1. Operate in capital markets, credit, banking, and insurance with a workforce of more than 500 employees, and whose balance sheet amounts to more than €20 million;
2. Or have more than €40M in annual revenue

CSR-RUG continues to become more closely aligned with the European Union's updated Corporate Sustainability Reporting Directive (CSRD), the new EU Sustainability Reporting Standards (ESRS) laws, and the European Taxonomy, which we expect will see CSR-RUG reporting broaden to more German SMEs.

A big goal of CSRD is to standardize and simplify sustainability reporting for companies across Europe, including Germany. Many organizations are already under pressure to use a wide range of different sustainability reporting standards and frameworks due to requests and pressures from regulators, investors, and customers. The EU CSRD aims to consolidate European ESG and sustainability reporting into a single framework that meets the needs of EU regulators, investors, and other stakeholders.

DNK (Sustainability Code) Reporting Requirements

To comply with DNK, organization's need to prepare and submit an annual report that outlines their company's strategy, process management, policies, and performance across 20 criteria related to environmental, labor and social affairs:

Environmental reporting under DNK includes carbon accounting disclosure of an organization's Scope 1, 2 & 3 greenhouse gas (GHG) emissions.

Reporting for the DNK must conform with non-financial performance indicators and sustainability KPIs from GRI, and The Sustainability Code can be used for non-financial reporting in order to comply with CSR reporting (CSR-RUG) in Germany. The Code Office checks a declaration for formal completeness.

DNK and CSR reporting disclosure can be:

A non-financial (consolidated) declaration or non-financial (consolidated) CSR-RUG report must be published every financial year. If a CSR-RUG report is published on the company's website (instead of the Federal Gazette pursuant to Sect. 325 HGB), it must be publicly available for ten years.

Your Next Steps With Reporting Under CSR-RUG and Germany's DNK Sustainability Code

For organizations in the early stages of their sustainability reporting journey, we have a few general recommendations, additional reading, and suggested next steps:

Materiality assessment - Before collecting data or thinking about preparing your first report, you need to conduct a "Materiality Assessment" to help determine what your sustainability goals, targets, KPIs, and reporting topics should be under DNK and CSR-RUG (and, in fact, a materiality explanation is the second disclosure section within a DNK report). A materiality assessment is a project which determines and ranks the most material themes for your business based on market data, stakeholder interviews, and surveys. For example, a healthcare company might focus on healthcare access, affordability, innovation, and its supply chain. A technology company could focus on data privacy, security, and STEM education access. A bank might designate financial inclusion as its most material theme. Pick and rank the right sustainability themes depending on your organization’s mission, sector, model, and ESG maturity.

Sustainability data systems and process - While this might go without saying, in order to report your organization's sustainability performance and track DNK and GRI sustainability KPIs, you need to know what they are - with a high degree of accuracy. Your materiality process can help guide you toward the main sustainability themes you may need to focus on and collect data around. Many organizations start their sustainability reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger companies. If you're an organization with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and data management software, like the kind we design here at Brightest to help organizations stay ESG compliant. Ongoing report archiving, version control, and governance are also important to think about, since you'll be reporting every year.

Further reading - Our free guides to sustainability measurement and ESG reporting provide additional, detailed guidance and insights on how to measure and report your sustainability performance.