Sustainability reporting: Federal Cabinet approves government draft for German implementation of the CSRD

published on 24 July 2024 | reading time approx. 2 minutes

On July 24, 2024, around four months after the publication of the draft bill, the Federal Cabinet adopted the government draft to transpose the Corporate Sustainability Reporting Directive (CSRD) into German law without further debate. Following the meeting, the government draft was published on the website of the Federal Ministry of Justice together with a synopsis and an information paper.

The CSRD aims to significantly expand the content of reporting obligations on sustainability aspects compared to its predecessor, the Non-Financial Reporting Directive (NFRD) and its national implementation in the form of the CSR Directive Implementation Act (CSR-RUG). Furthermore, the quality, relevance and comparability of sustainability reporting are to be improved through the mandatory use of uniform European Sustainability Reporting Standards (ESRS). The transposition of the CSRD into German law will therefore replace the CSR-RUG that has been in force in Germany to date.

The deadline for transposing the CSRD into German law formally expired on July 6, 2024, 18 months after the CSRD came into force. Like some other EU member states, Germany therefore failed to implement the directive on time. The application of the directive is staggered according to the size and capital market orientation of a company – large capital market-oriented companies with more than 500 employees must therefore report for the first time for the current financial year 2024, while all other large companies are required to report from the 2025 financial year onwards. Many of the companies affected are already in the middle of the process of preparing their first CSRD-compliant report due to the tight schedule and the high implementation effort and will gain a little more legal certainty with the publication of the government draft.

The following important key statements can be derived from the government draft on CSRD implementation, among others:

1:1 adoption of the content defined in the CSRD (except for rights of choice)
Confirmation of the auditor as the sole auditor of the sustainability report
Postponement of the submission deadline for LkSG reports for financial years that began before January 1, 2024 to December 31, 2025

Now that the government draft has been approved by the Federal Cabinet, it is an official draft bill of the Federal Government, which still has to be submitted to the Bundestag.