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EU Member States must transpose the CSRD into national law by July 2024, with a phased-in approach for implementation. The initial reporting group is expected to submit reports for the financial year 2024 by 2025. This sustainability reporting mandate will greatly impact EU countries like Germany and EEA members. To delve further into its implications, keep reading.

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Connect to a new world of efficiency by utilizing cleversoft’s business solutions.

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The Corporate Sustainability Reporting Directive (CSRD), a European directive that took effect in January 2023, requires companies to publish regular reports on environmental and social impact activities with their financial reports. The directive aims to increase transparency regarding how companies manage sustainability risks and the sustainability impacts of their operations throughout their value chain. As with financial reporting, auditors will scrutinize this sustainability information.

By July 2024, EU Member States are required to transpose the CSRD into national law. The implementation follows a phased-in approach, with the first reporting group submitting their reports in 2025 for the financial year 2024.

This new sustainability reporting requirement will have significant implications for EU countries like Germany and members of the European Economic Area (EEA).

National Implementation Overview

The European Union (EU) currently consists of 27 member countries, each of which is in the process of implementing the CSRD. Additionally, Iceland, Liechtenstein, and Norway, which are members of the European Economic Area (EEA), will also adopt the directive. These countries are aligning their implementation schedules with the CSRD’s requirements.

France has taken the lead within the EU by transposing the CSRD into its national legislation. As a result of this transposition, the thresholds from the Non-Financial Reporting Directive (NFRD) will be adjusted. Specifically, companies with more than 250 employees and exceeding certain balance sheet totals and revenues thresholds will now fall under the scope of the CSRD.

Other European countries, including Finland, Denmark, the Netherlands, Slovakia, and Slovenia, are also progressing toward adopting the CSRD. However, each country is taking an individualized approach to implementation:

  1. France and Norway: These countries are actively working to expand the CSRD regulation to include more companies. Their goal is to achieve broader coverage and enhance transparency in sustainability reporting.
  2. Denmark: In contrast, Denmark has proposed raising the reporting thresholds by 25%. This adjustment would result in many businesses being classified into a lower reporting category, thereby reducing the number of enterprises required to disclose their sustainability practices.
  3. Germany: Germany aims to streamline the implementation process by adopting the CSRD without significant modifications (i.e., implementing it “1:1”).

National Implementation in Germany

The Federal Justice Ministry in Germany has recently unveiled a draft law aimed at incorporating the CSRD into national legislation. For more information you can visit the website of the Federal Justice Ministry. Here are the key points:

  1. Direct Application of European Standards: The draft proposal intends to directly apply the European standards for sustainability reporting without any additional modifications or alterations.
  2. Progressive Implementation: Germany will progressively implement the new sustainability reporting requirement. Initially, starting from the 2024 financial year, it will apply exclusively to large, listed companies with over 500 employees.
  3. Phased Inclusion: In the subsequent years, leading up to 2028, there will be a phased inclusion of additional company categories. Notably, the 2025 financial year is expected to witness a significant expansion. During this period, large non-listed companies will be required to report their sustainability practices for the first time.
  4. Estimated Impact: Approximately 13,000 German companies are projected to be affected by this requirement. These include corporations, limited liability partnerships, and cooperatives according to current estimates.

The CSRD implementation in Germany reflects the country’s commitment to enhancing transparency and accountability in corporate sustainability reporting, aligning with broader European efforts.

The bureaucratic burden on companies will be streamlined to only what is strictly necessary. To prevent duplicate reporting requirements, the Corporate Sustainability Due Diligence Directive (CSDDD) proposes changes. Going forward, companies can fulfill their obligations under the CSDDD by submitting a single sustainability report, thereby addressing two requirements simultaneously. Within corporate groups, the sustainability report from the parent company should suffice. If a subsidiary is covered in this collective report, it won’t need to submit a separate report under the CSDDD.

The draft proposal includes the following key points:


Timeline for CSRD Implementation

CSRD Service offering by cleversoft

At cleversoft, we closely monitor the regulatory developments related to the CSRD at both the EU level and within individual countries. Our comprehensive 360-degree service assists financial institutions in navigating the CSRD. We ensure coverage of all relevant national adaptations of the directive, providing a compliance guarantee for our clients.

If you would like to find out more about our CSRD Services, please visit our website.