The Corporate Sustainability Reporting Directive (CSRD), adopted by the European Parliament in November 2022, will bring about far-reaching changes for many German companies. In the future, these companies will be required to prepare a comprehensive sustainability report covering environmental, social, and governance (ESG) issues as part of their management report. The new sustainability reporting requirements offer an opportunity to systematically embed sustainability within the company, which can have a positive impact on capital raising, cost structures, and business success. However, the effort companies expend to implement sustainability reporting must be proportionate.

Companies newly subject to these reporting requirements, in particular, face major challenges: They must adapt to a new type of reporting and adjust their processes accordingly. This requires a significant investment of resources and incurs high additional costs. It is therefore crucial that policymakers design the implementation of sustainability reporting in Germany to be practical and limit the bureaucratic burden on companies. This requires a major joint effort. In this brochure, the BDI and the DRSC provide information on the new sustainability reporting regulations and offer affected companies practical guidance on implementing the CSRD.

The New European Sustainability Reporting

Under the previous Non-Financial Reporting Directive (NFRD), approximately 500 companies in Germany have been required since 2017 to publish a non-financial (consolidated) statement addressing sustainability aspects. The CSRD’s reporting requirements now apply to approximately 13,200 companies in Germany; they are to be implemented gradually for fiscal years beginning on or after January 1, 2024. However, the CSRD not only affects significantly more companies with regard to sustainability reporting requirements, but the nature and scope of sustainability reporting have also changed compared to the NFRD: Affected companies are additionally required to give greater consideration to sustainability issues within their corporate organization.

National Implementation of the European Directive

Since the CSRD is an EU directive, its provisions must be transposed into German law. In March 2024, the Federal Ministry of Justice already published a draft bill for a German CSRD implementation law, according to which, for example, only certified public accountants are permitted to audit the new sustainability reports. Furthermore, the draft provides for a link to the Supply Chain Due Diligence Act (LkSG) to avoid duplicate reporting obligations. The BDI participated in the consultation on the draft bill by submitting a statement. The national implementation of the CSRD should ultimately be limited to a one-to-one transposition of the European requirements and should not create any additional bureaucratic burden, but rather achieve the greatest possible simplification for the benefit of German companies. Instead of a “preparation-based approach,” a “disclosure-based approach” should be chosen for electronic reporting, and companies should be free to choose whom to commission for the audit from all three options provided by the EU: statutory auditors, certified public accountants, and independent audit service providers. Furthermore, duplicate or overlapping reporting requirements should be avoided.

BDI Event on Sustainability Reporting

In addition, the BDI, together with its partners DRSC, econsense, and EY, hosted a high-level event in May 2024 to provide information on the German draft bill for the implementation of the CSRD and the resulting challenges for future ESG reporting. Together with decision-makers from politics, government, and standard-setting bodies, as well as experts from academia, business, and the auditing profession, we discussed the details of the current draft bill. Among other topics, the discussion focused on the challenges related to the preparation and audit of the management report, integrated reporting, and the electronic reporting format. In thematic “deep dives,” experts from the corporate sector, the auditing profession, and industry associations also examined the specific challenges of materiality analysis and the draft SME standards “LSME” and “VSME,” which are currently under consultation.