GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
(CSDDD), which aimed to implement the UN Guiding Principles on Business and Human Rights throughout the global supply chain, came into force in July 2024. 7.2 ESG Developments HGB Under the HGB, larger listed capital companies with more than 500 employees are under a duty to issue a non-financial declaration that expands their manage - ment report. This declaration has to briefly describe the business model of the company. Moreover, it has to refer to other aspects of corporate social respon - sibility – at least to environment-related, employee- related and social matters, as well as to the respect shown for human rights and the efforts made to fight corruption and bribery. CSRD Following the adoption of the Omnibus I Package (approved by the Council of the European Union on 24 February 2026 and published in the Official Journal of the EU on 26 February 2026), the scope of applica - tion of the CSRD has been significantly reduced. In the future, only companies or groups with more than 1,000 employees and annual turnover of more than EUR450 million will be required to report on sustain - ability in accordance with the CSRD. This will also apply to non-EU companies with net turnover in the EU of more than EUR450 million, and to their subsidi - aries and branches generating turnover of more than EUR200 million in the EU. Reporting in accordance with the European Sustain - ability Reporting Standards (ESRS) will remain in place, but its application will be simplified. The use of sector-specific standards will be voluntary. In addi - tion, smaller companies will no longer be required to provide additional information beyond the voluntary standards to larger business partners (the so-called value chain cap). The German Federal Cabinet approved a first draft bill in September 2025, aiming to transpose the CSRD into the German Commercial Code (HGB) by the end of 2025. The German government has announced that it will incorporate the CSRD amendments adopted at European level into the current legislative process. The existing reporting requirements will continue to
apply for the 2025 financial year. Furthermore, with the publication of the new delegated regulation on EU taxonomy disclosure requirements – (EU) 2026/73, which came into effect in January 2026 – materiality thresholds were introduced and reporting obligations were simplified. In June 2021, the federal government passed the so-called Supply Chain Act ( Lieferkettensorgfaltsp- flichtengesetz ), which obliges companies to respect human rights and the environment throughout the global supply chain, and to remedy violations. For this purpose, companies must establish an appropriate risk-management system and conduct a risk analysis for themselves and suppliers. The first is ensured by the appointment of an internal officer for monitoring the system. Companies must also establish a pro - cedure for filing complaints concerning human rights violations. Finally, companies must publish an annual report on their compliance containing fulfilment of their obligations under the Supply Chain Act. The law came into force on 1 January 2023 for companies in Germany with at least 3,000 employees. As of 1 Janu - ary 2024, the new regulations apply for companies with at least 1,000 employees. The EU Corporate Sustainability Due Diligence Direc - tive (CSDDD) came into force in July 2024. Following the adoption of the Omnibus I Package, the scope of the CSDDD has been substantially narrowed. In future, due diligence obligations will only apply to companies or groups with more than 5,000 employees and a net annual turnover of more than EUR1.5 billion, with the same thresholds applying equally to non-EU compa - nies provided that the relevant net annual turnover threshold is met within the EU. Affected companies will be required to carry out scoping exercises to identify risks in their chain of activities, and shall only request information from business partners with fewer than 5,000 employees where the information required for an in-depth assessment cannot be obtained in any other way. The obligation to submit transformation plans for compatibility with the Paris Climate Agree - ment has been dropped. All affected companies must comply with the require - ments of the CSDDD as of 26 July 2029, with the application deadline having been set as a uniform date
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