BMJV Publishes CSRD Implementation Plan for Germany: The Government Draft of September 3, 2025, as a Signal in the European Omnibus Process

CSRD Implementation in Germany by 2025: Cabinet Decision Sends a Signal in the EU Omnibus Debate

On September 3, 2025, the Federal Cabinet published the government’s draft bill to implement the Corporate Sustainability Reporting Directive (CSRD). With the current draft, which corresponds to a 1:1 transposition of the European law, Germany is setting the course for the transposition of the directive into German law by the end of 2025. The draft will now undergo further deliberation by the Bundesrat and the Bundestag before the draft bill is enacted as binding national law.

Nevertheless, the draft comes at a time of significant change: Through the omnibus packages, the EU is seeking to simplify and realign the CSRD, CSDDD/CS3D (the European equivalent of the Supply Chain Due Diligence Act), the EU Taxonomy, and the CBAM. EFRAG—the European Standards Development Body—or ESRS, put far-reaching changes to the ESRS out for consultation at the end of July; the European Commission has issued a targeted “quick-fix” relief package for so-called “Wave 1” reporters.

In light of these developments, this article provides an overview of current trends and the implications of the Omnibus legislation both in Germany and at the European Union level.

The Background: CSRD Implementations and the European Omnibus Initiative

Starting in 2023, the CSRD will gradually require tens of thousands of companies in Europe to adopt standardized, digital, and verifiable sustainability reporting in accordance with the ESRS—with the aim of providing reliable ESG information to capital markets, banks, regulators, and stakeholders.

The European Commission’s Omnibus Initiative (February 26, 2025) addresses precisely this issue: simplification and reduction of administrative burdens while focusing on larger companies. Key points include raising the threshold to 1,000 employees, the “stop-the-clock” rule, and targeted adjustments to the ESRS. The German government’s draft of September 3, 2025, reflects this approach: incorporation into the German Commercial Code (management report), ESEF/XHTML issues, limited assurance, exemptions, and group structures.

The reporting requirements are as follows:

• Wave 1: Companies already required to report under the current NFRD. They were required to report for the first time in 2025 for the 2024 fiscal year. The omnibus package provides relief for companies with 501–1,000 employees, as they are to be exempted from the requirement for 2025/26.
• Wave 2: Large companies meeting the criteria of the German Commercial Code (HGB) (>250 employees, >€20 million in total assets, >€40 million in revenue) that were not previously subject to the NFRD. Originally, they would have become subject to reporting requirements in 2026 (for the 2025 fiscal year)—now the requirement has been postponed by two years.
• Wave 3: Listed SMEs (excluding micro-enterprises), which were originally required to report starting in 2027 for the 2026 fiscal year. They, too, will receive a two-year deferral under the “stop-the-clock” rule.
  

These changes will provide some breathing room during the implementation years of 2025–2026, but they do not alter the overall direction: transparency remains central, and limited assurance is becoming more closely aligned with financial reporting.

Trilogue Negotiations: The Debate Over the 1,000-Employee Threshold in the Omnibus Process

The issue of the threshold for CSRD reporting requirements has now become the most prominent political flashpoint. Originally, the threshold was set at 250 employees, which would have covered tens of thousands of medium-sized companies in the EU. With the Commission’s omnibus proposal from February 2025, this threshold was raised to 1,000 employees —a step that the Federal Ministry of Justice (BMJ) now explicitly confirms in the German government’s draft bill.

The consequences are far-reaching: while a threshold of 250 employees in Europe (EU+EEA) would bring approximately 48,000 companies within the scope of the regulation, a threshold of 1,000 employees would reduce that number to just around 11,800. For Germany, the number drops from just under 14,000 to just over 3,100 companies (source: Accountancy Europe / Orbis). This would mean that large segments of the upper mid-market would fall outside the scope of mandatory reporting—with immediate implications for capital market transparency, supply chain requirements, and competitive conditions.

When the trilogue negotiations begin in late 2025, it will become clear whether Germany’s approach—using 1,000 employees as the key threshold for CSRD compliance—will actually become European policy. One thing is certain: the issue of thresholds is the key point of contention.

• Commission: Its omnibus proposal from February 2025 sets a new standard of 1,000 employees, coupled with an increase in the revenue threshold for groups based in third countries.
• Council: The member states have generally endorsed this approach, but some are calling for additional concessions, such as higher revenue thresholds.
• Parliament: The picture here is still mixed. While some members of Parliament are calling for a significant reduction to 500 employees, a restrictive proposal is also on the table that would only apply to companies with 3,000 or more employees.
  

This makes it clear: The range currently extends from an expansion of the scope (500 employees) to a significant restriction (3,000 employees). The outcome of the trilogue will determine not only the number of companies required to report, but also the credibility with which the EU pursues its sustainability agenda in the coming years.

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Critics, such as Accountancy Europe—the European umbrella organization for auditors, tax advisors, and accountants—emphasize that this will disrupt key information flows and undermine comparability within the single market. Proponents, on the other hand, point to the reduction in administrative burdens and the need to focus limited audit and advisory resources on large companies.

Criticism of the CSRD Implementation: Voices from Germany and Europe

The release of the revised German draft bill in July 2025 sparked a broad expert debate. Numerous associations and institutions voiced their concerns and proposed improvements:

In the German debate on the draft CSRD implementation plan for July 2025, professional associations largely called for pragmatism and legal certainty. While the IDW and WPK pointed to the need for clear rules on audit authority and limited assurance with realistic transition periods, the DRSC criticized the ESEF/iXBRL requirements and, like the German Banking Industry Committee, advocated for a disclosure-based solution. The German Stock Institute emphasized bureaucratic costs and competitiveness and advocated for a one-stop report as well as more flexible deadlines. The German Cement Industry Association, on the other hand, warned against duplicate obligations, expressed skepticism toward ESEF, and advocated for a broader range of auditors.

Despite differing perspectives, a common thread emerged: there was a call for pragmatism, legal certainty, the avoidance of duplicate reporting, and greater integration of sustainability and financial reporting. However, the question of who will have audit authority and the extent of the ESEF requirements remains controversial.

Prominent figures also spoke out at the European level:

• On September 2, 2025, Eurosif published a joint statement signed by hundreds of investors and companies. The statement called for simplified yet substantive rules: dual materiality, retention of the 500-MA threshold, binding transition plans, risk-based due diligence requirements, and guaranteed interoperability.
• The EFRAG vice-chair warned Responsible Investor that narrowing the scope of application too much would be counterproductive: simplification should not be confused with a loss of substance.
  

Eventually, a third dimension came to the fore—the debate over the rule of law. Civil society organizations such as ClientEarth and the Corporate Europe Observatory filed a complaint with the EU Ombudsman in the spring of 2025. They criticized the omnibus procedure as rushed, lacking transparency, and conducted without a sufficient impact assessment. The Ombudsman’s office launched an investigation. For companies, this means that the legal validity of the Omnibus amendments is being scrutinized not only politically but also legally—with potential implications for areas of application and liability issues, particularly in the context of CS3D.

ESRS Amendments 2025: Changes to the EFRAG Draft (July 2025)

Since July 31, 2025, EFRAG’s Amended ESRS package has been available as an exposure draft—accompanied by change logs and a public consultation open until September 29, 2025. The primary objective is to reduce complexity and duplicate reporting without abandoning the underlying logic of dual materiality.

The exposure drafts include targeted adjustments across all categories of the ESRS. While the extent of the simplification varies, the general direction is clear: in addition to consolidating and, in some cases, simplifying disclosure requirements, the focus is on greater interoperability and clarity. Two examples: The draft of ESRS 1, “Double Materiality,” clarifies terminology (e.g., gross vs. net impacts) and highlights the connection between IROs and reporting topics. ESRS 2 allows reporting on policies, actions, and targets only if they exist; if something is missing, a checkbox indication suffices instead of a narrative explanation.

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EU Omnibus Initiative: Timeline of CSRD Amendments for 2025

February 2025:

• The Commission is presenting the omnibus package (simplified rules, focus on large companies, potentially narrower scope). At the same time, delegated acts are being prepared to defer obligations (“stop-the-clock”).

April 2025:

• The Stop-the-Clock policy is being finalized at the political level – Wave 2 and Wave 3 will be granted a two-year deferral. Wave 1 (initial reports for fiscal year 2024) is not affected by this.

July 2025:

• Die Kommission erlässt ein gezieltes „Quick-Fix“ für Wave-1-Reporter (Mitteilung vom 11. Juli 2025): Für die GJ 2025/2026 dürfen u. a. erwartete finanzielle Effekte weiterhin weggelassen werden; Phase-ins (zuvor < 750 MA) werden auf alle Wave-1-Unternehmen ausgedehnt. Praktisch bedeutet das: keine Eskalation der Offenlegungen im Vergleich zu 2024, temporäre Entlastung bei E4, S2–S4 u. a. – aber keine Absenkung der Grundanforderungen an Governance, Prozesse, Wesentlichkeit und Qualität.
• EFRAG is publishing the draft Amended ESRSs with the aim of streamlining them and making their application clearer (public consultation begins on July 31).

August 2025:

• In Brussels, discussions are underway regarding "quick-fix" updates and debates on interoperability (ISSB), the use of VSME, and indirect supply chain data, among other topics.
• The Commission takes note of the VSME's recommendations; EFRAG and stakeholders are discussing implementation guidance; at the same time, investors are expressing skepticism about oversimplification.

September 2025:

• With its draft legislation, Germany is sending a clear signal regarding transposition—the 1,000-employee threshold is being enshrined in national law and incorporated into the German Commercial Code (HGB), including audit requirements (limited assurance) and ESEF/XHTML requirements (controversial).
• The EFRAG consultation is underway; Parliament is preparing for the fall votes; the trilogue is expected to begin in Q4 2025.

Result: The summer was not a “summer lull,” but rather a critical convergence of regulatory simplification, technical adjustments, and national implementation—with the German draft serving as a benchmark for corporate practice.

Implications for German companies by size category

The following recommendations translate the situation directly into actionable steps —guided by the question“What should companies do now?” and tailored to the waves/size categories:

Large companies > 1,000 employees (or Wave 1/2 parent companies)

1. Consolidate data management: Stabilize the ESRS data model, document materiality processes (including “gross vs. net”), and optimize control systems (ICS/IKS) for auditability.
2. Make strategic use of the quick fix: Treat the relief measures (financial impacts, E4, S2–S4) for 2025/2026 as a breather, not a standstill—and plan a roadmap for full disclosures starting in 2027.
3. Refine the transition plan: Integrate ESRS E1 with capital allocation, KPIs (e.g., CAPEX/OPEX alignment), the decarbonization pathway, and governance; ensure interoperability with ISSB S2/TCFD.
4. Professionalize the supply chain: Integrate VSME templates into procurement processes and tier data requirements based on risk; review and redesign contractual levers (data obligations, audit rights, incentives for sustainable performance).
5. Assurance Readiness: Prepare for limited assurance early on with auditors (sampling, controls, IT interfaces, ESEF workflows). Test ESEF in a timely manner (XHTML, tagging, process integration).

Medium-sized companies (typically "Wave 2"; currently 250–999 employees)

1. Postponement ≠ Procrastination: "Stop the Clock" buys time—use it for data architecture, materiality, and an initial dry run on ESRS 2 + 2–3 Topical Standards.
2. A streamlined approach: Take a pragmatic first step toward data governance (key KPIs, responsibilities, documentation). Clarify ERP/ESG tool interfaces early on, but maintain an Excel prototype in parallel.
3. Stakeholder mapping: Gather feedback on the expectations of customers, banks, and investors—and prioritize key areas (e.g., energy, supplier Scope 3 emissions, social standards).

Unlisted SMEs & "Out-of-scope-but-in-demand"

1. Use the VSME standard: Establish the Core Module (11 disclosures) as a supply chain passport; supplement it with the Comprehensive Module to meet industry requirements.
2. Anticipate customer requirements: Monitor data hubs (supplier portals); review contract templates for data obligations and protective clauses (IP/confidentiality).
3. Banks & Funding Agencies: ESG information will increasingly influence access to credit and funding criteria—maintain a consistent set of KPIs.

Foreign subsidiaries with EU revenue

1. Scope Check: Continuously review the EU turnover threshold (discussion: increase to €450 million) and obligations for subsidiaries and branches.
2. Interoperability: Align ISSB/SEC reports with ESRS requirements; identify mappings and additional disclosures.

Strategic Framework for German Companies: Sustainability Reporting 2025–2028

The next three reporting cycles will determine whether companies establish compatible, robust, and auditable ESG systems. The German draft provides planning certainty in this regard—despite the ongoing debate in Brussels. Strategically speaking:

• Don't settle for the bare minimum: Even as thresholds rise, customer, banking, investor, and regulatory requirements remain high. Data literacy and the ability to adapt are key competitive factors.
• Materiality as a catalyst: A refined dual materiality allows for greater focus—but requires clear reasoning and documentation.
• Strengthening financial connectivity: Linking ESRS KPIs to budgeted and actual financials, scenarios, and CapEx paths enhances decision-making value and investor confidence.
• Assurance Proficiency: Those who confidently pass the Limited Assurance 2026/2027 exam will gain momentum and credibility—and reduce the amount of follow-up work required on the path to upgrading.

Further reading

• European Commission – Omnibus Simplification Package (February 26, 2025)
• EFRAG – Amended ESRS Exposure Draft (July 31, 2025)
• EFRAG – Public Consultation (60 days, until September 29, 2025)
• EFRAG – Non-Mandatory Illustrative Guidance (NMIG)
• European Commission – “Quick Fix” Relief for Wave 1 Reporters (July 11, 2025)
• Accountancy Europe – Proposal for a Solution with a 500-Employee Threshold (June 2025)
• Real Economy Progress – An Overview of Climate Transition Plans in the EU Context
• Responsible Investor – Criticism from EFRAG Vice Chair Regarding the Narrowing of the CSRD

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