Find the sustainability regulations that apply to your company

The European Commissions' proposal for the Corporate Sustainability Due Diligence Directive (CSDDD) integrates human rights and environmental concerns into business operations and corporate governance. The directive aims to promote sustainable and responsible corporate practices along the value chain. Once the negotiations around the CSDDD are concluded, and the proposal is accepted, firms will be required to address negative effects of their actions, including those along their value chains both inside and outside of Europe. In contrast to the German Supply Chain Act (LkSG), the CSDDD will affect the entire value chain, as well as apply to a wider range of companies.

The Corporate Sustainability Reporting Directive (CSRD) establishes a uniform framework for the reporting of non-financial data for companies operating in the European Union. The CSRD replaces the Non-Financial Reporting Directive (NFRD) – and requires more detailed information on sustainability goals and key figures. More specifically, it requires disclosure about a company's business performance, results of operations, position and the impact of its activities. One of the most important differences compared to the NFRD is the introduction of the concept of double materiality.

As part of the European Green Deal, the EU Taxonomy Regulation sets criteria to determine if an economic activity can be considered sustainable. According to the EU Taxonomy, a sustainable economic activity has to be assigned to a defined taxonomy activity by the EU, contribute substantially to one of six defined environmental objectives, do not significantly harm any of the remaining environmental objectives, and comply with a series of minimum social safeguards. The goal of the regulation is to reorient capital flows to focus on sustainable investments and business activities including areas such as circular economy, renewable energy, and biodiversity.

The German Supply Chain Due Diligence Act (German: Lieferkettensorgfaltspflichtengesetz, LkSG) came into force on January 1, 2023. The LkSG regulates corporate responsibility for compliance with human rights and environmental protection in global supply chains. Therefore, a company's due diligence obligations apply to both the company's own business operations and to the actions of its direct contractual partners and other suppliers along the entire supply chain. This includes, for example, protection against child labor, the right to fair wages, and environmental protection. The law outlines several criteria which companies can use to identify their priorities when implementing their due diligences.

The Non-Financial Reporting Directive (NFRD) was adopted in 2014. Since its entry into force in 2018, it legally obliges companies to report on sustainability topics with regard to environmental, social and employee issues, anti-corruption measures, diversity, and measures to respect human rights. The CSRD is part of the Euopean Commission's "Green Deal" and will gradually replace the NFRD starting in 2024. In Germany, the NFRD is implemented by the CSR-RUG (CSR Directive Implementation Act).

The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of rules which requires financial market participants to provide information about how they deal with negative environmental and social impacts and risks of their investments. This mandated transparency aims to allow investors to better compare the sustainability performance of financial products and companies. Under the SFDR, companies must disclose so-called PAI indicators (principal adverse impacts on sustainability) that establish sustainability factors for investment decisions.

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