Germany may reduce number of companies subject to CSRD

Here’s a note from Andreas Rasche:

Germany is trying to undercut the CSRD by attempting to change the definition of SMEs. In a move to protect their “Mittelstand”, Germany tries to expand the definition of SMEs (from 250 to 500 employees). This would spare up to 8,000 companies from having to comply with the CSRD, because SMEs do not need to report under CSRD (unless they are publicly listed).

This would create a situation in which 16% of those companies currently in scope for CSRD would not have to report. Current scope is approx. 50,000 companies in Europe plus around 10,000 non-EU companies.

What a shame and what mediocre thinking. As always, lobbyists pulled the “bureaucratic burden” and “loss of competitiveness” argument (their ultimate argument against many ESG regulations), but:

1. Many mid-sized firms will face disclosure requests by larger business partners (e.g., buyers) in any case, as the CSRD takes a value chain perspective on sustainability.

2. We know from research that mid-sized firms often “act more” but “talk less” on sustainability. Reporting is a chance for these companies to showcase what they are doing enhancing transparency.

3. We would penalize those mid-sized firms that already started to prepare for CSRD-aligned reporting (and which often do a superb job!).

4. Without systematic sustainability information from mid-sized firms, we have an incomplete (and partly misleading) picture of where we stand within the green transition.

The EU Commission seems responsive to the German request; it has already suggested an initiative to adjust the size criteria.