The German Federal Ministry of Justice and Consumer Protection (BMJV) released a draft bill (ministerial draft – Referentenentwurf) on 10 July 2025 concerning the transposition of the Corporate Sustainability Reporting Directive (CSRD) into German law. Notably, the proposal already reflects the changes resulting from the Stop the Clock Directive whichentered into force on April 17, 2025, without further legislative negotiations and rules postponed entry of application of the CSRD by two years.

Under the CSRD, companies are grouped into three “waves” based on when they must begin reporting. These waves are part of the EU’s rollout of sustainability reporting requirements. The directive must be implemented into German law by December 31, 2025, and essentially provides for a two-year postponement of the initial application date of the CSRD for Wave 2 and Wave 3 of the affected companies. Furthermore, the draft bill provides that some Wave 1 companies will also not be affected by CSRD implementation for the time being.

Specifically, large companies that employ under 1,000 employees on average per year will be exempt from CSRD reporting for the 2025 and 2026 fiscal years. This is intended to prevent these companies from being subject to reporting requirements for only a few years if a reduction in the CSRD scope is decided at EU level.

German Legislation

On 3 September 2025, the BMJV released a final draft legislation (governmental draft), which closely mirrors the ministerial draft dated July 10, 2025. The new draft has already been forwarded to the Federal Council (Deutscher Bundesrat) and characterized as urgent, with a deadline of October 17, 2025. The urgency is due to the obligation to implement the directive into German law by the end of 2025.

The government draft already incorporates the postponement of the second wave and partnerships equivalent to those under Section 264a of the German Commercial Code (HGB) and third waves. However, it does not yet include the additional simplifications still under negotiation at the European level, such as raising the employee threshold to 1,000 or introducing a higher turnover threshold (the Council suggested €450 million). In this case, the German legislature must first await the final vote and resolution of the EU, which still seems possible given the postponement.

A further amending law would then have to amend the changes now to be incorporated into the HGB – a well thought out regulation looks different, but given the time-consuming situation, there is no other formal solution.

Omnibus Initiative

In parallel, the EU Commission’s simplification proposals (Omnibus Initiative, COM (2025)81), which have already been largely accepted by the Federal Government and the Federal Council and go beyond the postponement, will be further discussed at the European level and are likely to lead to an amending law in Germany in 2026. Among other things, the proposals include a permanent and significant reduction in the scope of the CSRD by raising relevant thresholds and legislative measures to limit the indirect reporting obligation even for smaller companies that are not required to report on sustainability (a so-called “value chain cap” to limit the trickle-down effect).

Further, the EU Commission appears to be considering delaying additional ESRS requirements for Wave 1 companies until FY 2027 because (i) “it is not considered reasonable to require undertakings to report additional information when there is a realistic prospect that they will not subsequently have to report any information” and (ii) the ESRS are being revised and might subsequently modify the requirements that Wave 1 companies are reporting on.