CSRD Draft Adoption by German Federal Government

In our previous blog from April 2024, we provided an overview of the status of the implementation of the CSRD into national law. By July 6th, EU member states were required to transpose the CSRD into their national legislation. In this blog post, we take a closer look at the key points for other legislations involved in this process.

Here you can find an overview of the progress across all EU countries.

By the deadline, 11 countries had at least partially adopted legislation implementing the CSRD, eight had proposed legislation, and four had held consultations.

Significant progress was made last month, with nine EU member states implementing the CSRD: Denmark, Finland, France, Hungary, Ireland, Lithuania, Romania, Slovakia, and Sweden. In the EEA EFTA region, Liechtenstein and Norway have also implemented the CSRD.

However, six countries (Austria, Belgium, Greece, Malta, Portugal, and Iceland) have yet to launch a consultation or introduce legislation for CSRD implementation. Тhese countries are expected to adopt transposing legislation in the upcoming months. Companies in these countries are advised to continue preparing for CSRD reporting.

Some countries foresee “gold-plating,” making adjustments such as:

• Denmark: Denmark will introduce new size limits for companies, increasing revenue and assets thresholds by 25%. This adjustment means many companies will be categorized differently under the new rules.
• France: The thresholds for large companies, initially set at €20 million for assets and €40 million for turnover, have been increased to €25 million and €50 million, respectively. French companies subject to non-financial reporting requirements, but not considered public interest entities, are still required to publish a report for 2024 under the previous regime.
• Finland: Finland’s proposal suggests delaying the first set of CSRD reports. Reports for certain companies would be due in 2025 for financial years beginning after January 1, 2024. Sweden’s proposal requires the first round of reports to be filed for financial years beginning after June 30, 2024. This means companies using the calendar year would report in 2026 for the financial year beginning January 1, 2025. Additionally, Sweden’s proposal includes amended turnover and balance sheet thresholds in the definition of “large undertaking,” setting these at SEK 550 million for turnover and SEK 280 million for assets.

Additionally, Germany has made significant strides in implementing the CSRD:

Germany
On July 24, 2024, the German Federal Government officially adopted the governmental draft of the Implementation Act for the EU Directive on Sustainability Reporting (Directive (EU) 2022/2464 – CSRD) into German law. This follows the draft law unveiled by the Federal Justice Ministry in March, which aimed to incorporate the CSRD into national legislation. You can find a detailed summary in our blog post.

The latest government draft largely aligns with the March proposal, confirming a direct implementation of the CSRD into German law. However, there are some key changes and clarifications:

1. Artificial Consolidation Exception: A German subsidiary of a non-EU/EEA parent company can temporarily be exempt from sustainability reporting if a European sister company produces a sustainability report in accordance with CSRD requirements.
2. Inclusion of Large Promotional Banks: Promotional banks with a balance sheet total exceeding €300 billion and those oriented towards capital markets are now required to comply with sustainability reporting under § 289b HGB-E.
3. Postponement of Digital Reporting Requirements: The requirement to prepare management reports, including sustainability reports, in electronic format according to the ESEF regulation, and mandatory tagging, is postponed to the reporting for financial year 2026 due to pending publication of the final taxonomy and sign off form the European commission.
4. Elimination of Separate Audit Reports: The need for a separate audit report on the sustainability report has been removed, as it exceeds CSRD requirements.
5. Extended Deadline for Report Submission: The deadline for submitting reports for financial years starting before January 1, 2024, under § 10(2) LkSG, has been extended to December 31, 2025, allowing companies to consider the substitution option with an HGB sustainability report.

In Germany, the audit of sustainability reports is restricted to certified public accountants or accounting firms (audit), as there are no equivalent legal requirements for independent assurance providers, a condition necessary under the CSRD.

The draft law will be reviewed by the Bundestag and Bundesrat, with potential adjustments before it is finalized through three readings and committee consultations in the Bundestag.

BaFin has welcomed the Corporate Sustainability Reporting Directive (CSRD). From BaFin’s perspective, the CSRD will lead to an improved data foundation, making it easier for financial companies to meet their disclosure requirements.

 

CSRD Service offering by cleversoft

At cleversoft, we closely monitor the regulatory developments related to the CSRD, both on EU and on national level, and ensure that these are implemented in the cleversoft standard CSRD service. We are finalizing the service implementation based on the current regulatory status and preparing for the first client onboarding.

Our team of CSRD specialists actively participates in all relevant workshops and events, including those hosted by EFRAG, to gain firsthand insights that inform our service’s continuous enhancement.

We offer a holistic 360-degree service designed to guide financial institutions through the complexities of the CSRD. For more information about our CSRD Services, we invite you to explore our website.