Compliance28.01.2022 Newsletter

EU CSR Directive: extended sustainability reporting obligations as of 2023

Since the 2017 financial year, certain companies have been required to submit a non-financial statement on their compliance with corporate social responsibility for each financial year on the basis of the EU CSR Directive and the German CSR Directive Implementation Act [CSR-Richtlinien-Umsetzungsgesetz – CSR-RUG] of 2017. This includes information about environmental and social matters, the treatment of employees, respect for human rights, and anti-corruption and bribery.

According to plans of the EU Commission, these obligations are now going to be extended as part of the implementation of the European Green Deal. To this end, the EU Commission submitted a proposal to amend the EU CSR Directive on 21 April 2021.

The circle of companies subject to reporting requirements is to be expanded to include all large corporations and partnerships treated as such on the basis of a limitation of liability, in particular GmbH & Co. KGs. In addition, all major banking and insurance companies would be affected by the change. Capital market orientation is no longer a criterion, nor is the minimum number of employees of currently 500.

The existing reporting standards, which are regarded as inadequate, are to be revised by mid-2022 and will already be mandatory for the 2023 reporting year, and for small and medium-sized listed companies from 2026 onwards, if the Directive is transposed into national law by 1 December 2022, as currently planned.

Potentially affected companies should therefore monitor ongoing developments, address their own reporting obligations in good time and, if appropriate, already set up the corresponding structures now.

Reporting obligations: current regulations

Under the current legal situation, corporations and commercial partnerships equivalent to corporations without at least one natural person as general partner, in particular GmbH & Co. KGs, are required to submit a non-financial statement if the following criteria are met:

  • they have sales revenues in excess of 40 million euros and/or total assets in excess of 20 million euros;
  • they are capital market-oriented; and
  • they employ an annual average of over 500 people.

This applies to credit institutions and insurers regardless of their legal form and capital market orientation.

The reporting obligations can be fulfilled within or outside the framework of the management report. They are not subject to any auditor’s review as to content, and are only subject to non-binding requirements in the form of the guidelines published by the EU Commission.

New: expansion of the circle of obligated companies

In future, the reporting obligation is to be extended to all large corporations and commercial partnerships equivalent to corporations. For credit institutions and insurers, this applies independently of their legal form. Another new aspect is that the capital market orientation or the previously required number of employees of over 500 is no longer relevant. In consequence, the reporting requirement is triggered when two of the following three conditions have been met:

  • sales revenue of over 40 million euros;
  • a balance sheet total of over 20 million euros; and/or
  • an annual average of over 250 employees.

Furthermore, all listed enterprises in the EU are to fall under the reporting obligation. Micro-enterprises are excluded. This is expected to increase the circle of companies subject to reporting requirements thirty-fold from the current figure of less than 600 in Germany.

Expanded content

The EU Commission intends to expand and concretise the existing content requirements. For example, the report should include a description of the business model and strategy, incorporating resilience or sustainability considerations in particular and setting out plans of how the company can be reconciled with a sustainable and climate-neutral economy. Stakeholder interests and the company's influence on environmental and social factors must also be indicated. The report should additionally include a description of the sustainability targets set and an indication of how far the company has come towards achieving these targets. Finally, the role of the management and supervisory bodies in relation to the sustainability factors is to be explained.

In order to further improve the quality and comparability of reporting, the content requirements for the report are also going to be improved by mandatory EU reporting standards, which are currently being developed by the European Financial Reporting Advisory Group (EFRAG) and are expected to be available by the end of October 2022. As the standards are going to be applied as early as the 2023 financial year, there is very little time for companies concerned to adjust to the new content requirements and to establish or adapt corresponding structures.

Mandatory inclusion in the management report and content review

According to the proposed Directive, the non-financial statement is to become a mandatory part of the management report. This should provide the users of the information with a better understanding of the course of events, business results and situation of the company.

Capital market-oriented companies must disclose their financial statement documents in a European Single Electronic Format (ESEF) since the 2020 financial year. This is now also going to apply to companies obliged to report on sustainability.

Finally, it will be mandatory for the first time to have the content of the sustainability report reviewed by an auditor, initially as “limited assurance” audit. In particular, the auditor examines the process of how information was obtained for the sustainability report, compliance with certain requirements according to the ESEF and certain "green" financial indicators.

Legal consequence in case of violations

For violations, the member states are to provide for appropriate sanctions, which include fines and the publication of the name of the natural person or legal entity responsible for the violation.

Under current German law, misrepresentations in the non-financial statement can already constitute a criminal offence by management bodies, punishable by imprisonment of up to three years or a fine. Even failure to comply with the requirements for the non-financial statement can lead to significant fines. These sanctions will doubtlessly also apply to the extended CSR Directive in the future. It is even possible that they will be tightened.


If the European Commission's proposed amendments are implemented as planned, significantly more companies will be required to prepare a sustainability report in the future. The details of the content requirements for the sustainability reporting obligations are still currently under revision. They will only become more specific during the course of this year. However, as the current status is that the extended sustainability reporting requirements will already apply from 2023, and for small and medium-sized listed companies from 2026, the companies concerned should monitor developments and take precautions now.

Back to list

David Falkowski

David Falkowski

Junior PartnerAttorney

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 221 2091 497
M +49 174 6378 398