GERMANY Law and Practice Contributed by: Friedrich Gebert, Hannah Düwel, Bernhard Gröhe and Clara Schmidt, ARQIS Partnerschaftsgesellschaft mbB
the Omnibus Package by the EU proposes significant amendments to the CSDDD, it remains to be seen how Germany will transpose the reformed version into German law. Influence of the TCFD The work and recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) influ - ence national policy and regulatory positions on cli - mate change liability and reporting in different ways. According to the current legal situation, companies can use a national, European or international frame - work for their non-financial statement (Section 289d of the Commercial Code), which they are required to do under applicable German law. A not inconsiderable number of DAX, MDAX and SDAX companies use the recommendations of the TCFD. However, there is a change with the European Corpo - rate Sustainability Reporting Directive. The application of the European Sustainability Reporting Standards (ESRS) will become mandatory. The CSRD entered into force on 5 January 2023 and must be applied for the first time in reports covering the 2024 finan - cial year; ie, published in 2025. EU member states were required to transpose the directive into national law by 6 July 2024. However, Germany has not yet completed the transposition process. A draft bill was introduced in March 2024, but the legislative process stalled due to political developments. As a result, the European Commission initiated an infringement pro - cedure against Germany in September 2024 due to the failure to complete the transposition. Moreover, the EU Omnibus Package will, when adopted, post - pone the reporting obligation to 2027. On 29 Septem - ber 2025, the federal government submitted a new draft bill to parliament, which is currently undergoing the legislative process. The draft aims at a one-to-one transposition of the CSRD and already incorporates the amendments introduced by the Omnibus Pack - age. Nevertheless, the recommendations of the TCFD remain important. Both the basic structure of the TCFD recommendations (governance, strategy, risk management, targets and indicators) and the climate-
related disclosures recommended by the TCFD have been incorporated into their respective standards. Reporting Under IFRS S1 and IFRS S2 IFRS S1 and IFRS S2, issued by the International Sus - tainability Standards Board (ISSB), are designed to establish a global baseline for sustainability-related financial disclosures. In Germany, companies are not legally required to report under IFRS S1 and IFRS S2, as these standards do not constitute manda - tory reporting requirements under national law or EU legislation. Within the EU regulatory framework, sustainability reporting is primarily governed by the Corporate Sustainability Reporting Directive (CSRD) and the ESRS. Under the CSRD regime, companies are required to report in accordance with ESRS. While ESRS and IFRS S1 and S2 are conceptually aligned in several areas, they differ in important respects, including their underlying materiality concepts. As a result, the two frameworks are not fully interoperable, although certain disclosure requirements partially overlap. Although IFRS S1 and S2 are not binding in Germany or the EU, they are highly influential at the international level. They are expected to serve as a global reference framework for sustainability report - ing, and companies with significant exposure to inter - national capital markets may voluntarily incorporate elements of IFRS-based reporting to enhance com - parability for global investors. 4.2 Directors’ Climate Change Liability German criminal legislation does not provide for a specific form of personal liability related to the impacts of climate change. Sanctions against individuals can nevertheless be considered, if environmental law is violated or documentation obligations are breached. However, as explained in 2.6 Climate Litigation , com - panies can be held liable under German civil law. Environmental (Punitive) Law According to the current legal situation in German criminal law, legal entities are not subject to criminal liability. Accordingly, only the natural persons acting within a legal entity can be criminally prosecuted and not the company itself. There are no criminal offences in the German criminal code that punish action that could have an impact on
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