GERMANY Law and Practice Contributed by: Friedrich Gebert, Hannah Düwel, Bernhard Gröhe and Clara Schmidt, ARQIS Partnerschaftsgesellschaft mbB
in or are linked to the EU ETS. By 2030, CBAM will be extended to all EU ETS sectors. For exporters from Germany/the EU CBAM applies only to imports, not exports. German exporters of carbon-intensive goods therefore bear the full EU ETS carbon cost in production but receive no equivalent border protection when selling into third-country markets with weaker carbon pricing – a recognised competitive disadvantage. Under the European Climate Law, Germany is also required to report its national emissions and com - ply with the reduction goals set out for Germany. A national monitoring obligation of sectoral emissions is enshrined in Section 5 of the KSG. International Co-Ordination and Alignment Germany and the EU pursue alignment through sev - eral channels. The EU Task Force for International Carbon Pricing and Markets Diplomacy promotes global carbon pricing and supports Article 6, Paris Agreement (PA) implementation. CBAM acts as an indirect alignment driver, incentivising trading partners to introduce equivalent mechanisms. At multilateral level, Germany and the EU participate in ICAP, the World Bank’s Partnership for Market Implementation, the Global Carbon Pricing Challenge, and the Open Coalition on Compliance Carbon Markets. 4. Liability for Climate Change and ESG Reporting 4.1 Liability for Climate Change and ESG Reporting ESG Reporting Requirements Under current German law, big corporations (ie, those with over 500 employees) are required to file a so- called non-financial statement within their annual report under Section 289b of the Commercial Code ( Handelsgesetzbuch – HGB). This ESG report must contain information on envi - ronmental concerns, employee concerns, social con - cerns, respect for human dignity and the fight against corruption and bribery. In the case of environmental issues, the information may relate, for example, to
greenhouse gas emissions, water consumption, air pollution, the use of renewable and non-renewable energies or the protection of biodiversity. With the introduction of the CSRD, the scope of application was significantly expanded. However, member states raised concerns about the resulting administrative burden, prompting reforms adopted under the so-called “Omnibus Package” in Febru - ary 2025. The Omnibus Directive was published in the Official Journal of the EU on 26 February 2026 and entered into force on 18 March 2026, introduc - ing substantial amendments to the CSRD. Under the revised framework, mandatory sustainability reporting generally applies only to companies with more than 1,000 employees and annual net turnover exceeding EUR450 million. The reform is expected to significant - ly ease compliance obligations and reduce the num - ber of companies subject to the CSRD. In addition, reporting requirements for companies that were origi - nally due to enter the reporting regime in later waves had already been postponed by two years under the “Stop-the-Clock” Directive, which entered into force in April 2025; the Omnibus I Directive does not alter those amended timeframes. In addition, there are reporting obligations under the German Supply Chain Due Diligence Act ( Lief- erkettensorgfaltspflichtengesetz – LkSG). The LkSG requires companies with 1,000 or more employees to take measures to prevent human rights viola - tions and environmental harm in their supply chains. Companies covered by the law must submit annual reports on their due diligence measures and publish them free of charge and accessible for seven years on their website. However, in the coalition contract of the new German government, the parties agreed to abolish the LkSG. It is to be replaced by a law on international corporate responsibility that implements the European Supply Chain Directive (CSDDD) in a low-bureaucracy and enforcement-friendly manner. The reporting obligation under the LkSG shall be abol - ished. Accordingly, the federal government has intro - duced a draft bill which represents an interim measure pending the final national transposition of the CSDDD, aimed at reducing administrative burdens during the transitional period while improving the practicability and enforceability of the existing LkSG framework. As
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