GERMANY Trends and Developments Contributed by: Stephan Waldhausen, Moritz Pellmann, Justus Anacker and Cristina Hajek Gross, Freshfields
Germany has not yet transposed the Directive (EU) 2022/2464 on Corporate Sustainability Reporting (CSRD) into national law, missing the July 2024 deadline. As a result, the EU Commis - sion launched infringement proceedings against Germany (and 16 other EU Member States) in September 2024. The CSRD requires large and listed companies to report in line with the EU Sustainability Reporting Standards (ESRS; Com - mission Delegated Regulation (EU) 2023/2772), which establish binding, harmonised standards to ensure the comparability of sustainability information across the EU. However, German implementation of the CSRD stalled ahead of the February 2025 federal elections and now awaits action from the new German Bundestag. In February 2025, the EU Commission proposed narrowing the CSRD’s scope in response to con - cerns over excessive bureaucracy. Under their revised proposal, only companies meeting the following thresholds would be subject to the directive: • more than 1,000 employees; • either over EUR50 million in turnover or EUR25 million in total assets. This would exempt around 80% of previously affected companies. Similarly, under the EU Commission’s proposal, Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable invest - ment (EU Taxonomy Regulation) will apply only to companies with: • at least 1,000 employees; • EUR450 million in global turnover. Meanwhile, the already enacted Stop-the-Clock Directive grants a two-year delay for companies
originally scheduled to report in 2026 or 2027 (so-called Wave 2 and 3 companies), allowing time for EU co-legislators to finalise the pro - posed amendments in the Omnibus packages. However, large public interest entities with more than 500 employees (so-called Wave 1 compa - nies), are still expected to report under the CSRD in 2025 for the 2024 financial year. In the absence of national implementation of the CSRD, companies in Germany must still comply with sustainability reporting requirements set out in the German Commercial Code ( Handelsge- setzbuch , HGB). This includes submitting a non- financial statement as part of the management report for large publicly traded companies with more than 500 employees. Whether reporting in 2026 (covering the 2025 financial year, for Wave 1 companies) will be governed by the CSRD depends on the pend - ing transposition law. Until then, it is uncertain whether the CSRD will apply to 2026 reporting in Germany. In the meantime, companies may voluntarily apply the EU Sustainability Reporting Standards (ESRS) under the HGB. According to the guid - ance of the Institute of Public Auditors in Germa - ny ( Institut der Wirtschaftsprüfer in Deutschland , IDW), companies may adopt the ESRS in their non-financial statements to the extent they want – in full, in part, or not at all. Voluntary adoption can enhance transparency and build stakeholder trust, while also preparing companies for future regulatory requirements. However, it carries risks such as increased scru - tiny and potential accusations of greenwashing. Companies must carefully weigh these factors. Despite the challenges, many German firms are already choosing to align with the ESRS frame -
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