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In this episode of Sustainability Matters podcast, host Christian Orth explores how Siemens is using sustainability reporting as a powerful management tool to help steer business performance. As new regulatory frameworks such as CSRD (Corporate Sustainability Reporting Directive) roll out, he explores whether ESG disclosure is simply an administrative burden or a tool to drive real value.
Christian is joined by Thomas Knoblauch from Siemens AG and Caroline Pfaff, Partner at EY GmbH & Co. KG Wirtschaftsprüfungsgesellschaft (EY Germany) to break down the practical reality of ESG reporting. Together, they look at the challenge of complex global data, tracking how organizations can move past chasing “perfect” real-time metrics and instead prioritize immediate progress over perfection.
They discuss the real-world operational challenges, how Siemens successfully built a 360-degree target framework directly into its board-level decisions and how focusing on material KPIs, like carbon intensity and product carbon footprints, can simultaneously mitigate long-term risk while unlocking competitive advantages.
Through it all, Thomas and Caroline highlight that building a strong company culture is what can drive true organizational transformation as well as the opportunities to unlock real business value.
Key takeaways:
Building a sustainable mindset across the organization is more critical for success than perfect data tracking systems.
Companies should refine their metrics continuously over time.
Effective CSRD reporting can drive real-world operational and financial decisions.
For your convenience, full text transcript of this podcast is also available.
Christian Orth
Hello, and welcome to the EY Sustainability Matters podcast, our regular look at ESG and sustainability topics and how they impact businesses around the globe. I'm Christian Orth, EY Global CCAS Sustainability Reporting and Assurance Solution Leader and your host for this episode. Thank you for tuning in to our podcast.
Orth
Today, we'll unpack how companies turn sustainability reporting from a compliance output into a management tool for steering performance, innovation and value creation. By using digital tools and real-time data, we see companies turning compliance insights into smarter resource management, new products and operational excellence, shifting from reactive reporting toward proactive business model reinvention. The result?
Sustainability starts driving value as opposed to solely disclosures.[HI1.1] I'm delighted to welcome today a guest from Siemens AG, Thomas Knobloch.
Siemens is a German multinational company, which is focused on industrial and building automation, rail transport, and health technology.
Thomas is the head of Sustainability Reporting and Controlling, a global leader known for its innovation and commitment to shaping the sustainable future of industry and infrastructure. After holding CFO roles, Thomas is now driving sustainability performance at Siemens with a vision for turning ESG transparency into strategic action and measurable impact. Welcome, Thomas.
Thomas Knobloch
Thank you, Christian, for having me. I'm really excited to discuss how we turn sustainability into measurable impact for Siemens and for society.
Orth
Alongside Thomas, I'm joined by my colleague Caroline Pfaff. She is a partner at EY Climate Change and Sustainability Services in Germany (EY GmbH & Co. KG Wirtschaftsprüfungsgesellschaft). Caroline focuses on sustainability reporting, transaction and transformation advisory. She's also Consumer Products and Retail lead within assurance advisory in Germany, one sector that focuses on turning ESG into business value.
Caroline Pfaff
Thank you for the invitation. Looking forward to the discussion and to bring a bit of sector view on how other companies are also tackling a similar view than Siemens. So, thank you very much.
Orth
It's a pleasure to have you both on our show today. So, let's start with the first opening question for you, Thomas. Can you tell us more about how you can use your sustainability reporting as a powerful management dashboard?
Knobloch
Yeah, and Christian, the sustainability statement itself is published just once a year. So, of course, it's not suited as a daily management dashboard. However, the process of creating it has the power to transform organizations. It moves from simply tracking of past actions to actively guide future decisions, enabling leaders to set priorities and to drive innovation.
And what is most important is to align sustainability with strategy and business success. Overall, transparency, and I firmly believe it, is the foundation for improvements because only transparency can turn things into actionable insights and to drive smart decisions. And overall transparency is the base for sustainability performance and performance management, and this is at the end what it is all about.
Pfaff
I cannot agree more. Overall, we see an increasing number of companies steering ESG performance up to the board. And from my observations, those companies are doing so not because of regulation or CSRD [Corporate Sustainability Reporting Directive] but because they link sustainability to a clear business value for them — customer value, for example, if you take the CPR [Consumer Products and Retail] sector but also supply chain resilience. And so, those companies use the processes from their sustainability statement to reach exactly this goal. And I fully agree with Thomas. Strong processes to monitor data and steer performance are key.
Orth
So, Thomas, when actually did sustainability reporting stop being backward-looking disclosures and became a more strategic steering tool at Siemens?
Knobloch
At Siemens, I have to say that sustainability has always been deeply rooted in our history and DNA. So, Siemens is fully committed to drive the transition, especially in the critical areas like energy and mobility and, in our case, always powered with industrial AI. The Siemens portfolio is designed for this decade to enable this transformation. Ninety percent of our revenue is focused on helping our customers to become more sustainable.
And at Siemens, we believe we have to walk the talk, and we like to be a role model by providing that sustainability performance and financial performance can go hand in hand. And our past track record in financials and sustainability is underlining that very much. And with this strong foundation, it was always clear that Siemens wanted to do it right. And we embraced the introduction of the CSRD as an opportunity to develop an already good situation into an even better one to the next level and to create a true strategic steering tool.
Orth
Thomas, you said walking the talk. What changed first? Was it leadership, client attention, governance or the data?
Knobloch
What changed first? At Siemens, the attention to sustainability has already been present at the leadership level, up to the board. So, this was given. What was missing was that not all things were fully aligned at this time, and transparency was not consistently established across the organization. This became the starting point when we started with the CSRD. So, we used this opportunity to review our internal processes, to define clear priorities and to set concrete targets.
This is when sustainability reporting, or what I said before, the respective preparation, the respective process, delivers real value. So, we transformed mandatory disclosure to a strategic tool to focus all of our organization, create transparency and evaluate risk and opportunities in these areas to prioritize future actions. So, this is where I say the process in creating it can be incredibly powerful if you do it right and if you do it from the beginning with a positive spin.
Pfaff
Yeah, I mean, for most companies, and I think, Thomas, you explained that very well. This is a journey in the end, right? Bringing its own challenges, especially in the current disruptive context we are in. But I hear you saying it's key to stick to core values to drive the transformation and performance improvement.
At the global EY organization [HI2.1]we share this view, and that's why we developed from an advisory point of view, the Sustainable Operating Blueprint, which is a framework to support companies in exactly this process. So, the idea is to turn sustainability ambition into clear practical steps tailored for each organization, helping to create lasting change. So, I would invite you to read more about the blueprint in the description of this episode.
Orth
Thomas, allow me a quick question. What does real-time ESG actually mean in a global industrial company? What is the practical version of always on sustainability data? What do we have to understand?
Knobloch
For sure, data is of utmost importance not only since the century of artificial intelligence (AI). It is required to create the necessary transparency for ESG reporting. But it's critical to approach this new area pragmatically. I firmly believe it is better to start with inconsistent data, but to start, and then to focus on regular monitoring and improving data availability and performance over time. It would be wrong to wait for the perfect data point.
From my perspective, the real-time ESG data is not the right goal to begin with. Even in finance, after decades of reporting, we don't typically work with real-time financial data across the board. And so, when we started, we defined priorities, so what data is really important, what data points, and then, we created individual improvement plans for the key performance indicator (KPI).
And now, we are working on them, and we get better month by month. So, this is from my perspective, the right culture and pragmatic approach to sustainability data. By prioritizing progress over perfection, we create a sustainable pathway to better transparency, and there is too strong ESG performance. Don't be afraid; just get started.
Pfaff
I love the idea. Prioritize progress over perfection, and it's pointless to wait for perfect data points, especially because we all know the ESRS [European Sustainability Reporting Standards] reporting framework is still evolving. The auditing standards are coming, and the data points will be fine-tuned with the introduction of the revised ESRS as mandatory reporting framework in the future. So, I also believe culture is key to steer the performance and to reach continuous improvement across material areas of sustainability.
Orth
Thomas, would you be willing to share some insights? Because we would be interested in which indicators moved from annual reporting into your monthly or maybe quarterly management routines, and especially why.
Knobloch
Yeah, I mean, certainly, I can, but first, I like to underline what Caroline said, and I fully agree on that. Not all matrices of the ESRSs are equally relevant. But on the other side, some are absolutely critical. And as I've also outlined before, at Siemens, we took a very focused approach.
We defined a sustainability target framework based on our strategy and business model and based on the double materiality analysis, which is anyhow the starting point to create a sustainability statement. And out of this process, we derived 24 targets that are the most important ones for us. And they cover upstream, downstream and own operations, so the whole value chain. There are targets for Scope 1, 2, 3, for customer avoided emissions, for pay equity and work well-being. This is a true 360-degree target framework covering the most important impact areas for Siemens.
And we have focused on these targets because here we like to have robust data, clear accountability and consistent management routines. And by concentrating on what really matters, we can derive meaningful impact while keeping sustainability embedded in our operational processes. So, as a straight answer, we focused on these important topics first, and we are working continuously on to report on them, and at first on a quarterly and routine, and for selected ones, we are aiming for a monthly reporting. But this is a journey. In some areas, we are still ahead.
Pfaff
I like a lot the idea of the 360-degree framework also covering targets across the value chain, right? Because it shows that you drive performance but also resilience of the business model, which is the key link that actually generates the value creation of the system to framework. And when I reflect what I observe in the market, I think companies who genuinely drive value from sustainability are able to select material KPIs to monitor and steer their own performance depending on their business model.
So, it might be more on their own operation. It might be more on the value chain, obviously, depending on the business model and how it involves. And I increasingly see greenhouse gas emissions being one of those key performance indicators. And I personally expect also the product carbon footprint to play an increasing role there in the future because that's the direct link to each business model.
Orth
Thomas, from my side, I really loved you saying that focus on what really matters. So, allow me to shift gears, and let us have a look at turning sustainability compliance into really insights and valuable insights. Can you give us one concrete example where reporting requirements change decisions, resource allocations, operational performance or product or portfolio choices at Siemens?
Knobloch
Certainly, I can. And there are several examples available where this has happened. The one I like in particular is out of the EU taxonomy process. The ones who know this process know that there are questions about substantial contribution. Specifically, in the area of real estate, we used this opportunity to incorporate into our decision-making the criteria of substantial contribution. Meaning that whenever there is a real estate investment decision done, it is part of the board package. What would be the impact on our EU taxonomy capex alignment?
This does not mean that in every case it is a decision in favor of that, but it is always an informed decision. And when you look to the development of capex EU taxonomy alignment rate, this shows great progress and great performance. So, this is a concrete example where this transparency has changed the decision-making.
As said, there are many other examples like the Ecolabel of Siemens or in the area of energy efficiency, CO2 or green steel, but we don't have the time to talk about all of them. But all these examples demonstrate that reporting requirements and transparency support sustainable decision and at the end create real sustainable impact.
Pfaff
For me, the quantification of the climate transition plan and the integration in the financial planning of a company is also a very strong example because you see clearly there how decarbonization targets and ambition level steer and influence the investment decisions and also product design decisions, for example, through R&D.
Orth
Thomas, allow me a quick follow-up question because in sustainability … how did you ensure it didn't just stay in the sustainability or nowadays also in the finance department but really reached operations and business leaders? How did you get there?
Knobloch
Yeah, and as this mentioned example shows, we integrate sustainability into operational processes, not as add-ons, but directly where the decisions are made. And as Caroline said, the important decisions are made in product development and in sourcing and investment decisions. And when their sustainability is considered, this clearly supports. Another area where things start are in the enterprise risk and opportunity management. When in this process, the leaders consider mid- and long-term sustainability risks, but also opportunities, then this also influences decision-making, and you get sustainability aspects early on integrated into the operational processes.
Orth
Yeah, I understand. But how did you avoid this typical trap, which we see very often that more disclosure, more disclosure is needed? Yeah. How did you avoid the trap of more disclosure without more performance? Because that's what this is about, right?
Knobloch
Yeah, when reporting alone does not make the trick and does not drive performance, specifically when it focuses on the wrong topics. The ESRS, they offer a solid framework. Even there were many and also criticism, but frankly, I love it. The DNA, the double materiality analysis, helps to identify company-specific risk and opportunities, and the framework asks about action and targets. This makes a lot of sense. And, however, there are some disclosure requirements, like the lengthy description of internal policies and unnecessary complexity to a statement and distract from critical issues. But staying focused on what truly matters is the key to avoid this trap.
Orth
Okay, that's good. But then, everything is being assured by your assurance provider. So, if we look at all this information, what does audit-ready traceability look like without slowing everything down on your side?
Knobloch
Frankly, I believe this assumption is misleading. And I don't state that because we are in an EY podcast. I really see it differently. The limited assurance requirement for compliance helps to create necessary transparency and robustness. And it helps also, what I believe is very important, to improve comparability within these sustainability reports. And we all know that this was not given in the first reporting season, but we see already a clear improvement in the second wave. And by the way, the ESRSs allow also more estimations and flexibility in the starting phase as many realize. You just have to make use of it. And if you use it for your advantage and your aim for continuous improvement, I said before, step by step, month by month. It will not slow down the process. It will even help. Pragmatism and optimism is definitely key.
Pfaff
I fully agree about the pragmatism of the ESRS. And when I think about the quantification of anticipated financial effects also there, right, there's a lot of pragmatism. If you have material risks, you really can quantify where with a method that is auditable; you’re more than welcome to do, but if it's not possible, it's also fine to have a qualitative statement. And this is bringing valuable information also to the investors and also really real value added into integration to the ERM because those are material risks that can really impact the cash flow of a company.
And I also love the perspective to have audit-ready processes as part of continuous improvement, because in the end, it helps increase accuracy of the same data, and it is an important step toward credibility, trust and performance. We also see some clients voluntarily choosing reasonable assurance of certain KPIs, especially the ones they see really important to steer their sustainability performance.
Orth
Okay, great. Thank you, Caroline. So, before we wrap up, let's pick up the pace with a lightning round. So, Thomas, in your direction, quick questions, one-line answers, please. And a few highly quotable takeaways for our audience would really make it perfect, so to speak, the cherry on the ice cream topping. Question number one: What is the one metric driving sustainability performance?
Knobloch
There isn't just one metric, just as in finance. This is very much enterprise specific and at the end 360 degrees as said before. But carbon intensity will certainly be among these key metrics as it directly ties to efficiency, cost savings and market positioning in the transition to a low-carbon economy, and we as Siemens are a big part of that.
Pfaff
Absolutely. Carbon intensity is key, and of course, product carbon footprint has one key aspect of it. And we see, for example, in the consumer product segment, several clients voluntarily seeking for assurance on their product carbon footprint processes. So not on the data, but on the process to increase trust and transparency on the data. And those clients are not doing that because it's required by CSRD but because it's adding customer value on their product.
Orth
Thanks, Caroline. Thanks, Thomas. So, question number two: One capability every company must have built first, is it governance, data architecture or culture, and why?
Knobloch
This is an easy one. It's culture. Because culture eats governance, data architecture and strategy for breakfast.
Orth
Looking ahead, what is the very first step leadership teams can take within the next 100 days to turn sustainability reporting to real business transformation and value creation?
Knobloch
Indeed, we can make our own podcast out of that. No, but let's frame it a little bit. First, the leaders have to frame sustainability reporting as a driver for the company's specific transformation and for competitive advantage. It's important to set it under this roof and not just as a compliance exercise. Secondly, it's important that you define a narrative that links sustainability to business value and long-term growth and get the visible buy-in of the C-level. And please do this in the very beginning. And then, engage the organization by creating compelling targets that align with ESG impact with real business objectives and strategy. Communicate clear business benefits regularly to sustain focus and alignment. And what I also feel is very important, celebrate milestones and speak openly about success stories and build and keep enthusiasm and momentum. You only get it done when you do it with some positivity.
Pfaff
I love the positive spin, and for me, it's key to link sustainability in the end to the equity story of a company. And I would just add, don't forget to build trust because it's key to internal and external stakeholders but also to capital markets in the end.
Orth
Great. So, reporting becomes value when it's embedded in governance, data quality and performance management, and decision-making. I think that was my takeaway. So, thank you, Thomas. Thank you, Caroline, for joining this discussion.
Knobloch
Thank you, Christian, for having me. It was real fun. And dear colleagues outside, let's get it started with pragmatism and optimism.
Pfaff
Thank you for having me on this episode.
And thank you to the audience for listening to Sustainability Matters. If you enjoyed this episode, please check out previous episodes on ey.com or wherever you got your episodes and podcasts from. We would love to hear from you, and we would love you to subscribe, provide ratings, reviews, and comments are always very welcome. Visit ey.com where you will find a wide range of related and interesting articles to help put these bigger topics in a context of your business priorities. And we look forward to welcoming you on the next episode of Sustainability Matters.
My name is Christian Orth. You can find me on LinkedIn and feel free to connect with me there or via email. Thanks so much for listening. Have a great day.
