The EU Direc­ti­ve on Sus­taina­bi­li­ty Report­ing and the LkSG

The EU Cor­po­ra­te Sus­taina­bi­li­ty Report­ing Direc­ti­ve (CSRD), which was adopted on 28 Novem­ber 2022, reve­als par­al­lels to the Ger­man Sup­p­ly Chain Due Dili­gence Act (LkSG) and the draft Cor­po­ra­te Sus­taina­bi­li­ty Due Dili­gence Direc­ti­ve, which has been thwar­ted for the time being.


The CSRD sti­pu­la­tes that annu­al reports must con­tain infor­ma­ti­on that shows the impact of the company’s acti­vi­ties on sus­taina­bi­li­ty aspects.

As alre­a­dy pro­vi­ded for in the LkSG, the CSRD requi­res a report on the per­for­mance of risk ana­ly­ses and the imple­men­ta­ti­on of pre­ven­ti­ve and reme­di­al mea­su­res. Howe­ver, the CSRD’s requi­re­ments are more goal-oriented. Among other things, com­pa­nies must be mea­su­red by whe­ther inde­pendent­ly defi­ned KPIs have been achie­ved and whe­ther pre­ven­ti­ve and reme­di­al mea­su­res have been suc­cessful. Com­pared to the pro­tec­ted legal posi­ti­ons of the LkSG, the CSRD requi­res more com­pre­hen­si­ve “sus­taina­bi­li­ty aspects” to be taken into account, inclu­ding, for exam­p­le, climate-related tar­gets (1.5°C tar­get, cli­ma­te neu­tra­li­ty by 2050), gover­nan­ce fac­tors (lob­by­ing), and more exten­si­ve human rights stan­dards (e.g. the UN Con­ven­ti­on on the Rights of Per­sons with Disa­bi­li­ties and the UN Decla­ra­ti­on on the Rights of Indi­ge­nous Peo­p­les).


The first-time report­ing obli­ga­ti­on for the respec­ti­ve pre­vious finan­cial year appli­es to

  1. lar­ge com­pa­nies (more than 500 employees) alre­a­dy sub­ject to the Accoun­ting Direc­ti­ve, in 2025;
  2. smal­ler com­pa­nies (more than 250 employees and/or sales of € 40 mil­li­on and/or total assets of € 20 mil­li­on) that are not sub­ject to the Accoun­ting Direc­ti­ve, in 2026;
  3. lis­ted SMEs (except microen­ter­pri­ses) and small and non-complex cre­dit insti­tu­ti­ons and self-insurance com­pa­nies, in 2027;
  4. non-European com­pa­nies that have net sales in the EU of more than € 150 mil­li­on and at least one sub­si­dia­ry or branch in the EU, in 2028.

For com­pa­nies in the “third group” (SMEs), sim­pli­fied report­ing obli­ga­ti­ons and the pos­si­bi­li­ty of an “opt-out” until 2028 are envi­sa­ged, the con­di­ti­ons for which are to be spe­ci­fied in a dele­ga­ted act by 31 Octo­ber 2023.


For com­pa­nies to which the LkSG appli­es, the main chan­ges are in the scope of the risk ana­ly­sis and the cri­te­ria for pre­ven­ti­ve and reme­di­al mea­su­res. The report­ing obli­ga­ti­on under the CSRD, on the other hand, should not pose an insur­moun­ta­ble hurd­le if the obli­ga­ti­ons under the LkSG are imple­men­ted sys­te­ma­ti­cal­ly and pro­per­ly – espe­ci­al­ly with regard to docu­men­ta­ti­on – and if sup­pli­ers have a com­pre­hen­si­ve con­trac­tu­al obligation.

Com­pa­nies that are not addres­sees of the LkSG but are sub­ject to the scope of the CSRD face grea­ter chal­lenges. This is becau­se the due dili­gence requi­re­ments must first be imple­men­ted in order to ful­fill the report­ing obligation.


More exten­si­ve due dili­gence requi­re­ments for more com­pa­nies: at the inter­face bet­ween trans­pa­ren­cy, taxo­no­my and sus­taina­bi­li­ty, the imple­men­ta­ti­on of the CSRD will mean a tigh­tening of the LkSG.


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