Overview
On 10 July 2025, the Federal Ministry of Justice presented a revised draft bill for the implementation of Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive – “CSRD”) as amended by Directive (EU) 2025/794 (available here; hereinafter referred to as the “Draft Bill“).
The Draft Bill represents a key step toward the now coherent implementation of the EU requirements for sustainability reporting, albeit delayed. Below, we provide an initial overview of the key contents of the Draft Bill.
In Depth
1. Background: Failed CSRD implementation and simplification of sustainability reporting at EU level
The initial legislative process for implementing the CSRD had already been initiated in 2024, but could not be completed in time for the implementation deadline of 6 July 2024, due to the collapse of the governing coalition. Against the backdrop of the infringement proceedings now initiated against Germany by the European Commission, the process will now continue in 2025 with the aim of transposing the EU requirements into national law properly and in full.
The CSRD, which came into force on 5 January 2023, regulates the requirements for corporate sustainability reporting. It obliges undertakings covered by its scope to disclose extensive information on sustainability risks and impacts. The aim is to provide investors and other stakeholders with reliable and comparable data in order to promote financial stability and create transparency about undertakings’ sustainability performance.
In February 2025, the European Commission presented a legislative initiative as part of the so-called Omnibus Simplification Package, which aims to simplify and harmonize existing EU regulations in the area of sustainability reporting (we reported on this here).
The first element of the Omnibus Simplification Package was then published in the Official Journal of the EU on 16 April 2025, as Directive (EU) 2025/794 (known as the “Stop-the-Clock“-Directive). This directive provides for a two-year postponement of the initial application dates of the CSRD for undertakings that were previously required to report for the 2025 or 2026 financial year (known as second- and third-wave undertakings).
Furthermore, the “Stop-the-Clock”-Directive postponed the initial application and implementation deadline of the Corporate Sustainability Due Diligence Directive (CSDDD) by one year.
The Draft Bill now presented serves to implement the CSRD and at the same time already takes into account developments within the framework of the Omnibus Simplification Package.
2. Key contents of the Draft Bill
2.1 Implementation of sustainability reporting in accordance with CSRD
The Draft Bill from the Federal Ministry of Justice aims to fully transpose the EU’s sustainability reporting requirements into German law, adjusted to the extended implementation deadlines set out in the “Stop-the-Clock”-Directive. The draft is closely based on the EU model and deliberately refrains from imposing stricter national requirements (known as Gold Plating).
In terms of content, the reporting requirements are embedded in the existing provisions of the German Commercial Code (Handelsgesetzbuch – HGB). Undertakings that fall under the regulation will in future have to include a separate section on sustainability in their management report. The content of this sustainability report is based on the European Sustainability Reporting Standards (“ESRS“), which set out specific requirements on environmental, social, and governance issues.
The report must cover both opportunities and risks related to sustainability aspects, including information on strategies, goals, progress, and relevant metrics. The application of “double materiality” remains a key principle: both the company’s impact on the environment and society and the relevance of sustainability issues to the company’s success must be taken into account.
2.2 Postponement of the initial application dates for companies in the second and third waves
For companies in the second and third waves, the initial application dates for CSRD sustainability reporting are postponed by two years in each case. Specifically, this means:
Reporting obligation only from 2028 for the 2027 financial year for companies in the second wave: This includes large companies not listed on the capital market, that would previously have had to report from 2026 for the 2025 financial year. Second-wave companies meet at least two of the following three criteria: (i) total assets of more than EUR 25 million; (ii) revenue of more than EUR 50 million; and (iii) more than 250 employees.
Reporting requirement from 2029 for the 2028 financial year for companies in the third wave: This includes, in particular, small and medium-sized enterprises (SMEs) that are public-interest entities. They would previously have had to report for the first time in 2027 for the 2026 financial year.
2.3 Exemptions of certain companies in the first wave
Although the simplifications planned by the EU as part of the Omnibus Package, with the exception of the “Stop-the-Clock”-Directive, have not yet been finalized, the German government is pushing for rapid implementation, according to the Draft Bill. The aim is to enable German companies to benefit from the expected simplifications as early as possible in a legally secure manner.
Due to the expected reduction in the scope of the reporting obligation, this is particularly relevant for companies in the first wave with 501 to 1,000 employees. Due to the threshold increase proposed in the Omnibus Package, they are to be exempted from the reporting obligation for the 2025 and 2026 financial years in order to avoid a short-term and thus disproportionate burden.
3. Outlook for further developments and conclusion
The Draft Bill represents a significant step toward implementing the CSRD in Germany – at the same time, EU developments remain crucial.
For example, the European Financial Reporting Advisory Group (“EFRAG“) was commissioned by the European Commission as part of the Omnibus Package to revise the ESRS. These specify the content requirements for sustainability reports and are to be streamlined and more clearly structured in the future. A first draft of the revised ESRS Set 1 is already available for consultation and comments can be submitted until 29 September 2025. EFRAG has until 30 November 2025, to revise the ESRS.
It remains to be seen whether the Draft Bill will undergo further significant changes as a result of developments at EU level during the legislative process.
