On July 24, 2024, the Federal Cabinet approved the government draft of the law to implement the Corporate Sustainability Reporting Directive (CSRD) into German law. This significant step follows the […]

On July 24, 2024, the Federal Cabinet approved the government draft of the law to implement the Corporate Sustainability Reporting Directive (CSRD) into German law. This significant step follows the draft bill from March 2024 and marks a crucial advancement in aligning national regulations with the EU’s updated sustainability reporting requirements. 

The CSRD mandates large European companies and capital market-oriented SMEs to adopt comprehensive sustainability reporting practices, including an audit obligation. This directive represents an enhancement of the existing framework, amending the Accounting, Transparency, and Auditing Directives to integrate detailed sustainability disclosures. 

The government draft introduces substantial modifications to several German laws to accommodate the CSRD’s requirements. Key changes include updates to the German Commercial Code, the German Stock Corporation Act, the Cooperatives Act, the Securities Trading Act, the German Auditors Act, and the Act on Corporate Due Diligence Obligations in Supply Chains (LkSG). These adjustments aim to streamline sustainability reporting and ensure it aligns with European standards. 

A notable provision in the draft law is the requirement for sustainability reports to be audited, either by the company’s regular auditor or a separate entity. This ensures the credibility and accuracy of reported sustainability information. Changes from the March draft include optimized regulations for the appointment and reporting of auditors, minimizing the risk of duplicate reporting obligations, and retaining the ESEF preparation solution to comply with the CSRD’s disclosure requirements. 

This move underscores Germany’s commitment to enhancing corporate transparency and accountability in ESG matters. The new regulations are expected to significantly impact how companies report their sustainability practices, aligning them more closely with EU-wide standards and improving the overall quality of ESG reporting. 

The full implementation of these changes will take effect as per the CSRD schedule, with further details outlined in the upcoming national legislation. 

Sources: 

https://kpmg.com/de/en/home/insights/2024/07/government-draft-csrd-implementation-law-published.html 

https://www.lw.com/en/insights/german-federal-government-adopts-draft-csrd-implementation-act