The document in full

The DIHK Executive Board believes that the legislation requiring sustainability reporting should fundamentally be abolished. A significant majority of companies in Germany regard the burdens emanating from the Corporate Sustainability Reporting Directive (CSRD) as unreasonable and ineffective. 

If the new EU Commission retains sustainability reporting, wholly or partially, the priority must be to limit the adverse effects on smaller companies. These indirectly affected firms would benefit from the proposals elucidated below. The provision of ESG data along the supply chain should also be introduced in a more practical manner than presently foreseen.

In a globalized world and against the backdrop of major social and economic challenges, responsible and sustainable business practices rooted in the principle of 'Honourable Merchant' are more relevant than ever. The necessary transformation of companies will, in the view of the IHK organization, only succeed if regulatory requirements focus only on the absolute essentials, are practical, and strengthen the economic location long-term. The legal obligations in the area of the three pillars of sustainability: Environmental, Social and Corporate Governance (short ESG) require the active cooperation of companies. The core of public discussions and increasing burdens for companies is the new legal obligation to report on their sustainability activities according to precisely defined standards. 
 
The new EU directive on sustainability reporting, called CSRD for short, gradually expands the number of directly affected companies in Germany from the previous 500 to about 15,000. This year, the directive will be implemented into German law: initially, large, capital market-oriented corporations with more than 500 employees must prepare a more detailed sustainability report starting in the fiscal year 2024. A year later, all large corporations equated people companies, parent companies of large groups will follow, and somewhat later so will small and medium-sized companies, provided they are capital market-oriented. Companies in third countries will also be partially included shortly thereafter. 

Companies required to report must indicate individual sustainability strategies and collect extensive data based on binding EU standards for sustainability reporting (European Sustainability Reporting Standards, ESRS), produce reports, have them audited, and disclose them. Preparing the report necessitates a wealth of information also from their supply chain, such as CO₂ emissions. Thus, requests from non-capital-market-oriented SMEs along the supply chain will gradually increase. This leads to the so-called "trickle-down effect" or "cascade effect": although such SMEs, per the European directive, are not formally obliged to report, in practice, companies with fewer than 250 employees must also collect sustainability information. It is still unclear how many companies will be impacted overall by this indirect effect of the directive. German companies have already had their first experiences of this kind during the introduction of the national supply chain law.

And that's not all: Various financial sector regulations further require credit institutions to obtain sustainability information from companies when financing them. Small and medium-sized enterprises are consequently confronted with various questionnaires from customers, suppliers, and banks. This consumes personnel and financial resources without yielding tangible benefits for sustainability development.

In light of the emerging bureaucratic burdens, companies believe it is urgent to amend the enacted measures and regulations. The DIHK presents five specific proposals to directly and indirectly relieve companies while simultaneously making the provision of ESG data along the supply chain more practical.