GERMANY Trends and Developments Contributed by: Stephan Waldhausen, Moritz Pellmann, Justus Anacker and Cristina Hajek Gross, Freshfields PartG mbB
rate Sustainability Due Diligence Directive (CSDDD – Directive (EU) 2024/1760). The CSDDD establishes a corporate due diligence duty requiring in-scope com - panies to identify and address adverse human rights and environmental impacts in their own operations and in their subsidiaries, and, where relevant, along their chain of activities. Against this background, and even ahead of the draft bill’s formal adoption, the German government has already taken administrative steps affecting enforce - ment practice under the LkSG. On 26 September 2025, the Federal Office for Economic Affairs and Export Control (BAFA) was instructed to discontin - ue the review of corporate reports under the LkSG. Where the draft bill envisages the deletion of specific administrative offence provisions, BAFA is to discon - tinue pending proceedings based on those provisions and refrain from initiating new ones. For remaining offences, administrative fines are to be imposed only under strict conditions – in particular, in cases of severe violations involving especially serious human rights abuses. BAFA is to pursue such proceedings only in narrowly defined and specifically substantiated circumstances, which it must demonstrate on a case- by-case basis. At the European level, the CSDDD has likewise under - gone regulatory amendments after the EU Parliament and Council adopted the “Omnibus I” package, which came into effect on 18 March 2026. The Omnibus packages follow the EU Commission’s proposals to simplify EU rules, reduce administrative burdens and enhance competitiveness. Member states are required to transpose the amendments by 26 July 2028, with the due diligence obligations expected to apply from 26 July 2029, and reporting obligations starting in 2030. The amendments include: • significantly raised applicability thresholds for com - panies with cumulatively at least 5,000 employees and a net worldwide turnover of at least EUR1.5 billion; • a more structured, risk-based approach to due diligence obligations along the chain of activities; • limiting the extent to which due diligence obliga - tions and information requests are passed down the value chain to small and medium-sized enter -
prises (SMEs), also referred to as the “trickle-down effect”; • removing the obligation to adopt and implement a transition plan for climate change mitigation; • extending the monitoring interval from at least annually to at least every five years; and • removing the standardised civil liability provision. The German government has stated that it intends to transpose the CSDDD into national law in a stream - lined and business-friendly manner. For now, compa - nies should remain compliant with applicable require - ments in Germany while preparing for the transition to the revised EU framework. Close monitoring of legisla - tive and regulatory developments remains essential, particularly during the transition period. Sustainability reporting Sustainability reporting has transitioned from a vol - untary initiative to an increasingly expected practice aimed at fostering corporate accountability and sup - porting risk management. However, as it becomes more widespread, so does the risk of greenwashing, where companies may present an exaggerated or misleading picture of their environmental and social performance. Amid this shifting environment, debates around the effectiveness and burden of sustainability reporting continue to evolve. Germany has not yet transposed the EU Corporate Sustainability Reporting Directive (CSRD – Direc - tive (EU) 2022/2464 as amended by Directive (EU) 2025/794). In September 2025, the government pub - lished a draft bill based on the CSRD as in force at the time, proposing that so-called “Wave 1” entities (including large public interest entities and issuers on an EU-regulated market with more than 500 employ - ees) report for the 2025 financial year. Anticipating changes at the EU level, the draft also includes a temporary exemption for companies with fewer than 1,000 employees for the 2025 and 2026 reporting years. The bill has not yet been debated in the Ger - man parliament. At the EU level, the newly adopted “Omnibus I” pack - age has narrowed the CSRD’s scope in response to concerns about excessive bureaucracy. For financial years starting on or after 1 January 2027, the CSRD’s
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