Update on the Implementation of the Corporate Sustainability Reporting Directive

With the end of the German government coalition, it is unclear how and when the implementation of the Corporate Sustainability Reporting Directive (CSRD) will be implemented into German law. As of now, it seems unlikely that the legislative process will be completed by December 31, 2024. If this is the case, numerous questions arise regarding the temporal applicability, particularly in light of the "prohibition of retroactive application." The Institute of Public Auditors in Germany (IDW) has examined the possible consequences of a delayed implementation of the CSRD.

Delays in the Implementation of the Corporate Sustainability Reporting Directive into German Law

Many EU countries have experienced delays with the implementation of the Corporate Sustainability Reporting Directive (CSRD) into national law. Germany is no exception. The German legislators have taken too long to adopt the EU Sustainability Reporting Directive (CSRD). Besides an ongoing EU infringement procedure, there is now a risk of retroactively applying the law.

Breakdown of the Government Coalition in November 2024

With the loss of the majority in the Bundestag, it seems unlikely that the CSRD will be adopted in time. That is before the last Bundesrat session on December 20, 2024. Therefore, the CSRD will likely be integrated into the German Commercial Code (HGB) in 2025. This delay impacts reporting for 2024, as the law was originally supposed to take effect in 2024.

Impact on Companies Already Obliged to Provide Non-Financial Reporting

If the Implementation of the CRSD is passed only in 2025, the question is whether it can apply to 2024. The IDW has examined this issue and concluded that a retroactive application is not possible under German law. Companies with a calendar-year fiscal year must therefore continue preparing their 2024 reports based on the current legal framework (Sections 289b ff. CC (HGB) or Sections 315b ff. CC (HGB) for group reports).

Application of the ESRS (European Sustainability Reporting Standards)

If the CSRD is not implemented by December 31, 2024, companies are not required to use the ESRS for 2024 reporting. The IDW sees this as permissible, since the ESRS are not yet part of the HGB. However, companies can still use the ESRS as a framework, as the HGB allows the use of standards. Partial application of the ESRS is also allowed, as long as the standards are clearly identified in the report.

Obligations Regarding EU Taxonomy Reporting

The obligation to report under the EU Taxonomy Regulation, as outlined in Article 8, remains unchanged. Regardless of the delays in non-financial reporting.

Impact of a late implementation of the CRSD on audit work

Since the new auditing requirement for the sustainability report has not yet been incorporated into the HGB, the previous regulations remain in place. Accordingly, the supervisory board checks whether the non-financial statement or report has been submitted. A public auditor can carry out a content audit.

Consequences of the Implementation of the Corporate Sustainability Reporting Directive in 2025 for Companies Required to Report from 2025

For companies required to report from 2025, the delay in adopting the law won’t change much. They must still comply with the new rules, despite ongoing uncertainties. However, as the sustainability report for these companies is due for the first time in 2025, there will be few examples to follow. The legislator may require companies with an offset fiscal year to report for 2024/2025, leading to few and delayed models for reporting.