GERMANY Law and Practice Contributed by: Jan-Ove Becker and Lukas Heber, Littler
Corporate Sustainability Due Diligence Directive (CSDDD) The CSDDD entered into force on 25 July 2024 and must be transformed into German national law until 26 July 2026 at the latest. This means that it is not applicable at the moment, but will be in the near future. In addition to various due diligence obligations an affected company must report once a year on matters covered by the CSDDD. The report must be written in at least one of the official languages of the EU and published no later than 12 months after the balance sheet date of the financial year. If the company is already required to report on sustainability according to Section 289c HGB (see above), it is exempt from the reporting obli - gation under the CSDDD. The scope of the Directive basically covers EU companies with more than 1,000 employees and more than EUR450 million in global net annual turnover. It also covers supreme parent compa - nies of a group if they meet the thresholds and companies from third countries if they generate a net turnover of EUR450 million in the EU. Member states have some flexibility in imple - menting the CSDDD with regard to sanctions. Therefore, it is not yet possible to say with certainty what the consequences of non-com - pliance will be. However, member states must provide regulations that include the following: • companies’ liability for damages resulting from breaches of their due diligence obliga - tions; • effective, proportionate and dissuasive sanc - tions for non-compliance; • forced payments ( Zwangsgeld ) that may amount to up to 5% of global net turnover; and
The CSRD obliged companies to provide infor - mation about anti-discrimination, equality, work - ing conditions, respect for human rights, etc. The sustainability reporting must be a mandatory component of the management (group) report and must be clearly identifiable in a section designated for this purpose. The management (group) report of companies must be prepared in the uniform electronic reporting format (within the meaning of Article 3 of Delegated Regula - tion (EU) 2019/815). The report must be checked for compliance with the European Sustainabil - ity Reporting Standards (ESRS), which contain details of the exact type and manner of report - ing. All large companies and groups are affected by the reporting requirement if they meet two of the following three criteria: • total assets of more than EUR25 million; • net sales of more than EUR50 million; or • more than 250 employees. Small and medium-sized enterprises (but not micro-enterprises) are also subject to reporting requirements if their transferable securities are admitted to trading on a regulated market in a member state – ie, if they are capital market- oriented in this sense. Certain insurance com - panies and credit institutions, regardless of their legal form, as well as certain third-country companies, are also subject to reporting require - ments. Member states have flexibility in implementing the CSRD with regard to sanctions, as the CSRD does not contain corresponding provisions. It is expected that the consequences for cases of non-compliance will be similar to the current sanctions for violations of 289c/315c HGB (see above).
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