Germany's Pressure on the EU to Ease Sustainability Reporting Rules

The German government urged the European Commission to ease sustainability reporting requirements, citing concerns over economic growth and competitiveness within the EU. Key ministers proposed delaying the start of the Corporate Sustainability Reporting Directive (CSRD) for large companies from 2025 to 2027, with reports published in 2028. SMEs would face a similar delay, moving their deadline from 2026 to 2028. Other proposals included raising reporting thresholds and removing sector-specific standards. The suggestions have sparked criticism, with concerns about legal uncertainty and potential disruptions to the EU Green Deal.

In December 2024, the German government approached the European Commission with a proposal to ease sustainability reporting requirements within the EU. A letter addressed to the EU Commissioner for Financial Services, Mairead McGuinness, reveals that several German ministries are concerned that the current rules could hinder economic growth and competitiveness within the European Union. According to the letter, companies could more effectively utilise their resources for sustainable growth and innovation if the reporting requirements were simplified.

Proposals from the German Government

The letter is signed by high-profile ministers, including Justice Minister Volker Wissing, Finance Minister Jörg Kukies, Economic Affairs and Climate Action Minister Robert Habeck, and Labour and Social Affairs Minister Hubertus Heil. It urges the European Commission to implement “swift and tangible regulatory measures” to optimise the European Sustainability Reporting Standards (ESRS). Germany supports the idea of consolidating European standards into a unified system and has proposed postponing the implementation of the Corporate Sustainability Reporting Directive (CSRD).

Key Changes Proposed by Germany:

  • Postponement of Reporting for Large Companies: Germany suggests delaying the start of CSRD reporting for large companies from 2025 to 2027, with reports to be published in 2028;
  • For SMEs: The proposal includes postponing the implementation of CSRD for small and medium-sized enterprises (SMEs) from 2026 to 2028, while maintaining the option for a two-year opt-out period;
  • Adjustment of Thresholds: Germany proposes increasing the threshold for mandatory reporting for large companies — from €50 million to €450 million in net turnover and from 250 to 1,000 employees. This change would reduce the number of companies subject to ESRS requirements in 2025;
  • Abolition of Industry-Specific Standards: The letter also proposes abandoning plans for introducing industry-specific reporting standards, which could create additional burdens for businesses.

Criticism of the Proposals and Consequences for the EU

Germany’s proposals have attracted criticism from some experts and politicians. Richard Gardiner, Head of EU Policy at the World Benchmarking Alliance, highlighted concerns that the proposals could create unnecessary confusion and weaken the collective efforts of EU countries to enhance corporate transparency. Similarly, Hans van der Waal, an advisor to sustainability initiatives within the EU, expressed that the changes might delay progress on sustainability goals, framing them as more of a political statement than a constructive step forward.

Conclusions

Impact on the Market and Competitiveness

Germany’s proposals represent an attempt to reduce the burden on businesses, particularly large companies and SMEs that may face difficulties complying with complex standards. However, such measures could weaken unity within the framework of the European Green Deal and threaten the EU’s long-term sustainability goals. While Germany seeks to simplify requirements, it is important to maintain a balance between supporting businesses and ensuring compliance with environmental standards.

Legal Uncertainty and Political Struggles

The proposed changes could also lead to legal uncertainty for companies that have already begun preparing for the new requirements. The political struggles within Germany and at the EU level complicate resolving the issue, particularly in light of upcoming elections.

As a result, while Germany’s proposals are aimed at reducing the burden on businesses, they may create additional challenges in reconciling a unified strategy at the EU level.