Germany is taking decisive steps to fulfill its obligations under the EU’s Corporate Sustainability Reporting Directive (CSRD). Following the previous draft legislation's failure to pass under the last Federal Government, the current administration has introduced a new CSRD Transposition Act aimed at aligning national law with EU requirements.

The move comes as the deadline for CSRD transposition expired on 6 July 2024, prompting the European Commission to initiate infringement proceedings against Germany. The new draft bill, published recently, seeks a direct and comprehensive implementation of the CSRD, with minimal room for national adjustments.

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Alignment with EU-Level Changes

The latest draft closely mirrors the 2024 version but incorporates critical updates in response to EU-level developments. One key consideration is the recently adopted “Stop the Clock” Directive, which appeared in the EU’s Official Journal on 16 April 2025. This directive delays the CSRD’s applicability for companies in Waves 2 and 3 by two years, giving them more time to prepare for the enhanced sustainability reporting requirements.

Germany’s draft legislation reflects these changes and aims to implement them nationally by 31 December 2025. The Federal Government also continues to advocate for further relief measures at the EU level to ease the burden on companies, particularly those caught in the early stages of CSRD application.

Key Provisions of the Draft Bill

The draft proposes sweeping amendments to the German Commercial Code (HGB), Securities Trading Act (WpHG), and the Auditors’ Act (Wirtschaftsprüferordnung) to fully integrate the CSRD. One significant element is a temporary exemption for certain Wave 1 companies. Specifically, firms employing no more than 1,000 people on average annually will not be required to comply with CSRD reporting obligations for the 2025 and 2026 financial years.

This exemption aligns with the EU Commission’s “Substance Proposal,” which suggests reducing the CSRD’s scope to avoid subjecting smaller companies to reporting rules that might later change. The proposed 1,000-employee threshold demonstrates Germany’s effort to ensure proportionality and legal certainty for affected businesses.

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The Road Ahead

While the draft bill signals progress, its passage will depend on the legislative process in the Bundestag and Bundesrat. With infringement proceedings already underway, Germany faces mounting pressure to finalize its transposition quickly.

For businesses, the new timeline offers some breathing room. However, larger companies in Wave 1 and those above the employee threshold must prepare for CSRD compliance as planned, ensuring they meet the enhanced environmental, social, and governance (ESG) reporting standards.

The German government remains committed to aligning national law with EU sustainability objectives while seeking to minimize disruption for domestic firms. The coming months will determine how swiftly and smoothly the CSRD is embedded into German legislation.

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Source: National Law Review