CSRD – Latest Developments at European and National Level

Companies continue to face legal uncertainty as to whether, and to what extent, they must prepare sustainability reports in accordance with the Corporate Sustainability Reporting Directive (“CSRD”). While the legislative process for the national implementation of the CSRD is still ongoing, further amendments to the directive and its related framework are also being prepared at EU level. We have summarized the recent key developments below:

The Response of the Federal Government (Bundesregierung) to the Opinion of the Federal Council (Bundesrat) on the CSRD Implementation Act

On 17 October 2025, the Federal Council issued its opinion on the Federal Government’s current draft bill implementing the CSRD. In its formal response of 29 October 2025, the Federal Government clarified its position and, in essence, reaffirmed its previous approach. The following points, among others, were addressed in the response:

Disclosure versus Preparation Approach

Instead of a preparation approach (Aufstellungslösung), the Federal Council advocates a disclosure solution (Offenlegungslösung) in ESEF format in order to reduce administrative burdens. While the Federal Government broadly shares this assessment, it considers the disclosure approach to be incompatible with the current Accounting Directive under EU law. It therefore intends to advocate an amendment to the Accounting Directive at EU level. At the same time, the Federal Government refers to the deferral provision contained in the draft legislation, pursuant to which the ESEF obligation does not yet apply to reports for the 2025 financial year; an extension of this exemption is currently under consideration.

Scope of Consolidation

According to the Federal Government, there is no room under EU law for the alignment demanded by the Federal Council between the scope of consolidation for sustainability reporting and that for financial reporting. Moreover, only such information must be included in the consolidated management report as is “necessary” to understand either the group’s impact on sustainability matters or the effects of sustainability aspects on the group. This assessment is governed by the requirements set out in the European Sustainability Reporting Standards (“ESRS”).

Audit of the Sustainability Report

The Federal Government will examine the proposal of the Federal Council to open up the audit market so that, in addition to auditors, independent service providers could also issue assurance opinions. At the same time, the Federal Government points out that the planned reduction in the scope of application of the CSRD is expected to lead to a significant decline in audit demand and that allowing additional independent assurance providers would require amendments or new legal provisions governing professional training, liability and sanctions.

Publication of the “Quick Fix” in the Official Journal of the European Union on 10 November 2025

On 10 November 2025, the European Commission published in the Official Journal of the European Union (Delegated Regulation (EU) 2025/1416) the delegated act (Delegated Regulation (EU) 2025/1416) introducing simplifications for the first set of European Sustainability Reporting Standards, commonly referred to as the “Quick Fix”. It intends to allow companies in the first reporting wave to benefit from extended and substantively broadened transitional provisions for certain ESRS disclosure requirements. Neither the European Parliament nor the Council of the European Union raised any objections within the two-month scrutiny period. We previously reported in detail on the objectives and content of the amendments.

European Parliament Defines Its Negotiating Position on CSRD Scope

On 26 February 2025, the European Commission presented two proposals as part of the Omnibus package to drastically simplify various sustainability reporting requirements (as previously reported here). The first proposal intends to significantly delay CSRD reporting requirement for specific companies (”Stop the Clock” proposal). Following its adoption by the Council of the European Union, the “Stop-the-Cclock” Directive was published in the Official Journal on 16 April 2025 (Directive (EU) 2025/794) and must be implemented by the Member States by 31 December 2025. The German draft CSRD Implementation Act already reflects this directive.

A second, more far-reaching amendment to the CSRD would significantly reduce the number of companies required to prepare a sustainability report, and the scope of required disclosures. Under the Commission’s proposal, the scope of the CSRD would be limited to large companies with an average workforce of more than 1,000 employees and either a balance sheet total exceeding EUR 25 million or net turnover exceeding EUR 50 million. After both the Council of the European Union and the Legal Affairs Committee of the European Parliament had adopted their respective positions (each proposing a threshold of 1,000 employees and EUR 450 million in turnover), the European Parliament set its final position on 13 November at 1,750 employees and EUR 450 million in net turnover. Raising the employee threshold from 1,000 to 1,750 would further reduce the number of companies affected across the EU.

Trilogue negotiations have been ongoing since 18 November 2025, with the stated aim of concluding the legislative process by the end of 2025.

Outlook

On 4 December 2025, the European Financial Reporting Advisory Group (“EFRAG”) will publicly present the revised ESRS. The review was prompted by the Omnibus package aimed at reducing and harmonising sustainability reporting obligations. EFRAG had already submitted the revised ESRS for public consultation on 31 July 2025; now, the final version will be formally presented to the European Commission. Overall, companies are well advised to continue closely monitoring developments at both EU and national level.