The German government is pressing the European Commission to scale back sustainability reporting regulations that it believes create obstacles to a path toward a more economically prosperous and competitive European Union on the global stage.
Several German ministries want the EU to slim down sustainability reporting requirements that are “overly extensive” – a burden for companies that can use their “resources for the benefit of sustainable growth and innovation in the EU”, said a letter sent to Maria Luís Albuquerque, the commissioner for financial services and the Savings and Investments Union, leaked by Table Media.
The letter was signed by federal minister of justice Volker Wissing, federal minister of finance Jörg Kukies, federal minister for economic affairs and climate action Robert Habeck, and federal minister of labour and social affairs Hubertus Heil.
Germany is urging the EU Commission to “come forward with rapid and tangible regulatory measures” to simplify the European Sustainability Reporting Standards (ESRS), the EU Taxonomy framework, and corporate sustainability reporting, the letter stated, adding that it backs the EU plan to consolidate sustainability rules in an omnibus law.
The government has asked in the letter to postpone the Corporate Sustainability Reporting Directive (CSRD) application deadline by two years, from the financial year 2025 to the financial year 2027, for large companies subject to first reporting next year or later, with the publication of reports scheduled then for 2028.
For small and mid-sized (SMEs) firms, according to the government, the backbone of European economies, the CSRD application should be postponed from the financial year 2026 to the financial year 2028, while maintaining the opt-out possibility for an additional two years.
This would also entail a postponement of the reporting obligations under the Taxonomy Regulation, which refers to the CSRD (Art. 8 Taxonomy Regulation), it added.
The government is also proposing a change to the thresholds for corporate reporting for large companies, to align with existing thresholds in the corporate sustainability due diligence directive (CSDDD).
The thresholds in terms of net turnover for corporate reporting should increase from €50m currently to €450m, and in terms of number of employees to 1,000 from currently 250.
This will mean, according to the government, a reduction in the number of companies that will have to report against ESRS in 2025, and an increase in the number of listed small and medium-sized companies reporting according to less stringent standards in 2026 and 2028.
Germany is also asking the EU Commission to scrap plans for sector-specific standards creating additional burdens for businesses.
Philippe Diaz, a member of the sustainability reporting technical expert group EFRAG, told IPE Germany’s proposals create uncertainties because large firms have already drafted their reports.
German political parties have started to campaign for the general elections in February, and “large companies don’t want transparency,” he added.
“It is populist electioneering at its best. It is a gang of old white men with the backing of [chancellor Olaf] Scholz that goes after the foundation of the European Green Deal”, he wrote earlier today in a LinkedIn post.
The letter was “a decision [taken] at the very top [political] level that is not technically sound,” Diaz told IPE.
It has created discontent within the Greens and the Social Democratic Party (SPD), in charge of the minority government until the elections, with blindsided members of parliament rushing to speak with party leaders on the content of the letter, according to sources.
The German political parties are immersed in electoral and political infighting and are using this legislation to promise quick but dysfunctional solutions, wrote law firm Frank Bold.
Germany’s attempt to force the EU to change sustainability reporting rules undermines the efforts of other member states supporting companies instead of confusing them and creating major legal uncertainty, it added.
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