CSRD in Germany: Requirements for Auditors

Where does German CSRD transposition stand?

The legislative history is a sequence of missed deadlines. Germany’s first cabinet draft (Regierungsentwurf) was adopted on 4 July 2024, one day before the EU transposition deadline. It proposed amendments to the German Commercial Code (HGB), the Stock Corporation Act (AktG), the Securities Trading Act (WpHG), the Auditors’ Act (Wirtschaftsprüferordnung, WPO), and the Supply Chain Due Diligence Act (LkSG). Before the bill could reach parliament, the governing coalition collapsed.

Nothing happened for months.

The Federal Ministry of Justice (BMJV) published a revised ministerial draft on 10 July 2025. A government draft followed on 3 September 2025 and was forwarded to the Bundesrat as urgent legislation, with a response deadline of 17 October 2025. The urgency designation reflects the transposition obligation, but urgency hasn’t translated into speed. Germany missed the 31 December 2025 deadline for transposing the Stop-the-Clock Directive into national law.

The September 2025 draft already incorporates the two-year postponement for Waves 2 and 3 from the Stop-the-Clock Directive. It also includes a 1,000-employee threshold drawn from the Omnibus I proposals, although the additional €450 million turnover threshold (added during the December 2025 trilogue) wasn’t included. Once the Omnibus I directive is formally adopted at EU level, the CSRD-UmsG will need to be amended again. Legislators and auditors alike should expect multiple rounds of revision before the law stabilises.

The European Commission opened infringement proceedings against Germany for failing to transpose the CSRD. Political pressure exists, but the practical reality hasn’t changed: German companies and their Wirtschaftsprüfer have been operating in legal uncertainty since mid-2024.

Both the IDW and the WPK have published guidance to fill the gap.

What the CSRD-UmsG changes in the HGB

The draft CSRD-UmsG renames the existing non-financial statement (nichtfinanzielle Erklärung) to sustainability report (Nachhaltigkeitsbericht). This is more than a label change. It signals that sustainability reporting will carry equal legal weight to financial reporting in the HGB framework, a significant upgrade in status.

Under amended §§ 289b ff. HGB for individual companies and § 315b HGB for groups, the sustainability report becomes a mandatory component of the management report (Lagebericht). Content must cover environmental, social, human rights, and governance factors, prepared under the ESRS. Companies apply the double materiality principle: they assess both the impact of their activities on people and the environment, and the impact of sustainability factors on the company’s financial position.

The government draft also requires management reports (including sustainability disclosures) to be prepared in XHTML format with XBRL tagging, consistent with the European Single Electronic Format (ESEF). This generated a wall of objections. The IDW, WPK, DRSC, and multiple industry associations criticised the ESEF requirement for management reports uniformly. Their argument: the existing disclosure solution (separate electronic filing) delivers equivalent transparency without massive technical overhead. Whether this provision survives into the final act is uncertain, but the opposition is near-universal.

One practical win in the draft: companies subject to both CSRD reporting and LkSG (Supply Chain Due Diligence Act) obligations can substitute the CSRD sustainability report for LkSG reporting. No duplication required. For companies caught in overlapping regimes, this consolidation is the single most useful provision in the draft.

Sustainability auditor registration and the 40-hour training requirement

Any Wirtschaftsprüfer who wants to sign a sustainability assurance opinion under the CSRD-UmsG must register as a Nachhaltigkeitsprüfer with the WPK. Registration requires evidence of at least 40 hours of CSRD-specific continuing professional development. The IDW Akademie already offers a two-module CPD course leading to the “Sustainability Auditor IDW” (Nachhaltigkeitsprüfer IDW) designation.

Here’s the problem. Because the CSRD hasn’t been transposed into German law, the WPK cannot process sustainability auditor registrations. The professional register has no legal basis for the entry. A Wirtschaftsprüfer can complete all 40 hours, receive the IDW designation, and still have no way to formally register with the chamber.

This is a circular dependency: companies need an auditor registered as a sustainability auditor; registration requires a law that doesn’t exist yet; the law can’t be applied until it enters into force.

For grandfathering, the CSRD provides transitional arrangements for Wirtschaftsprüfer who qualified before 1 January 2024. These auditors must still complete the required 40-hour training, but the educational bar is lower than for newly qualifying professionals. New entrants face a broader theoretical knowledge requirement covering sustainability reporting standards, legal requirements, and eight months of practical training. Existing Wirtschaftsprüfer need only the 40 hours of CPD.

Capacity is a real concern in Germany. Approximately 14,800 Wirtschaftsprüfer and 2,600 Wirtschaftsprüfungsgesellschaften are registered in Germany, but only a fraction have completed the IDW sustainability auditor training. Mid-tier firms face a binary choice: invest in training now, before any legal framework exists, or wait for the CSRD-UmsG and risk being unable to serve clients when obligations become enforceable.

Waiting is the riskier option. With Wave 2 reporting starting from FY2027, firms that delay training until the law passes will have roughly one year to build competence, hire, and staff engagements. Firms that start now will have a two-year head start.

The CSRD permits member states to allow independent assurance services providers (IASPs) outside the audit profession to perform sustainability assurance. Germany’s draft does not exercise this option. Instead, the explanatory memorandum (Gesetzesbegründung) signals a future review of whether to open the market to other providers, such as environmental verifiers (Umweltgutachter). For now, sustainability assurance is reserved exclusively for Wirtschaftsprüfer.

Limited assurance: scope, standard, and what it means in practice

From the first year of application, CSRD sustainability reports in Germany will require limited assurance (prüferische Durchsicht). The auditor issues a separate assurance opinion alongside the statutory audit opinion on the financial statements. Limited assurance is not a full-scope audit. The work centres on understanding business processes and the control environment for sustainability reporting, performing analytical procedures on disclosed metrics, and making enquiries of management and relevant staff.

Before December 2025, auditors were pricing and scoping engagements with a future transition to reasonable assurance in mind. That planning assumption is now obsolete. The Omnibus I provisional agreement removes the future obligation to obtain reasonable assurance on sustainability reports. Limited assurance is the permanent standard.

This changes engagement economics. Reasonable assurance would have required substantially more testing, sampling, and substantiation. Limited assurance is a lighter engagement by design. Firms that had built reasonable assurance cost models into multi-year proposals should revise them.

On assurance standards, the IAASB finalised ISSA 5000 (International Standard on Sustainability Assurance) in 2024, but the EU has not formally adopted it. Until adoption occurs, German practitioners will need IDW guidance on performing limited assurance engagements under CSRD. The IDW has indicated that it will issue practice guidance aligned with whatever EU standards are eventually adopted. In the interim, Wirtschaftsprüfer should expect to work with IDW pronouncements as their primary reference.

Fees deserve careful structuring. Article 4(2), subparagraph 2 of the amended EU Audit Regulation exempts sustainability report assurance fees from the statutory audit fee cap. This exemption covers all financial years beginning on or after 1 January 2024, regardless of national transposition status. Consulting and advisory fees related to CSRD implementation support are not exempt. Engagement letters should isolate the sustainability assurance component from advisory work, with separate fee quotations for each. Independence rules apply differently to each component, and the fee cap only exempts the assurance portion.

How the IDW views retroactivity and FY2024 reporting

The Institut der Wirtschaftsprüfer published two opinions on this question, on 14 November 2024 and 20 December 2024 respectively. Their position is unequivocal: retroactive application of the CSRD-UmsG to FY2024 would be unconstitutional under Article 20 of the German Basic Law (Grundgesetz), which prohibits retroactive legislation.

The same argument extends to FY2025. Only prospective application (once the act enters into force) would be constitutional.

This creates a practical gap that matters. Wave 1 companies (large PIEs with 500+ employees) were supposed to report for FY2024 under the CSRD. But if German law can’t be applied retroactively to that year, no enforceable domestic obligation exists for FY2024 reporting. And the same logic applies to FY2025 as long as the act remains unsigned.

Both the IDW and the DRSC (German Accounting Standards Committee) recommend a workaround. Companies should use the ESRS as their non-financial reporting framework under § 289d HGB, which permits companies to choose any recognised European framework. The ESRS qualify because they’re embedded in EU law through the CSRD delegated act. Partial application of individual ESRS standards is permitted, provided the company clearly discloses which standards it used and to what extent.

For auditors, the FY2024 and FY2025 sustainability information falls under the existing § 317(2) sentence 4 HGB, which requires the auditor to verify that the non-financial statement has been properly prepared and presented. Note what this is: a presentation review. Not a limited assurance engagement. The limited assurance obligation under CSRD only kicks in once the CSRD-UmsG is in force.

One loose end remains. Can a voluntary CSRD-compliant sustainability report, audited by a Wirtschaftsprüfer who has completed the 40-hour training but isn’t formally registered with the WPK, exempt foreign subsidiaries from their own CSRD reporting obligations? Nobody knows. The WPK flagged this issue, but no authoritative guidance exists. If your German parent company client wants to use its voluntary report to exempt Dutch or Belgian subsidiaries from CSRD reporting, get legal advice before relying on that position.

This matters especially for German groups with subsidiaries in EU member states that have already transposed the CSRD. A German parent that files a voluntary sustainability report under ESRS may assume its Dutch subsidiary is covered. But if the Dutch regulator (the AFM) does not recognise the German report as equivalent, because the German auditor lacks formal registration, the Dutch subsidiary could still face its own reporting obligation. Cross-border coordination between group auditor and component auditors needs to address this explicitly in the planning phase.

How the ESRS simplification affects German engagements

EFRAG published revised ESRS exposure drafts on 31 July 2025, with final technical advice submitted to the European Commission in December 2025. The simplified standards reduce mandatory data points by approximately 70% compared to the original ESRS Set 1. For Wirtschaftsprüfer planning sustainability assurance engagements, the scope of what needs to be assured shrinks proportionally.

Fewer data points does not mean less work on the assurance side, though. The remaining data points are the ones regulators consider most material, and they require more thorough process documentation from the reporting entity. A company that previously reported 200 data points superficially will now report 60 data points with deeper supporting evidence. Auditors should plan their procedures around data quality rather than data volume.

EFRAG’s revision also introduces clearer guidance on applying the materiality principle. Under the original ESRS, materiality assessments were a frequent source of auditor-client disagreement because the standards left wide room for interpretation. The simplified ESRS narrow this by specifying more precisely which disclosures are mandatory regardless of materiality (cross-cutting standards ESRS 2 in particular) and which are subject to the double materiality assessment. For engagement planning, this means fewer debates about whether a topic is in or out, and more focus on whether the data supporting included topics is sufficient.

Revised timeline and scope for German companies

After incorporating the Stop-the-Clock Directive and the December 2025 Omnibus I provisional agreement, German companies face the following timeline.

Wave 1 (large capital-market-oriented companies, 500+ employees): Required to report for FY2024 under the CSRD, though enforceability depends on the CSRD-UmsG entering into force (which it hasn’t). Companies with 501 to 1,000 employees are exempted from reporting for FY2025 and FY2026 under the draft act’s transitional provision. This anticipates the Omnibus I scope reduction and avoids a situation where companies report for a year or two only to be told they’re no longer in scope.

Wave 2 (other large companies): Postponed from FY2025 to FY2027 under Stop-the-Clock. First reports due in 2028. For German Mittelstand companies that were bracing for FY2025 reporting, this is meaningful breathing room.

Wave 3 (listed SMEs, small non-complex credit institutions, captive insurers): Postponed from FY2026 to FY2028. Under Omnibus I, listed SMEs exit scope entirely.

Wave 4 (non-EU companies with substantial EU activity): Unchanged. FY2028 reporting.

Under the Omnibus I provisional agreement, CSRD reporting applies only to companies with both 1,000+ employees and €450 million+ net turnover. The September 2025 government draft included the employee threshold but not the turnover threshold, which was added during the December 2025 trilogue. Another amendment will be needed.

For the German market, the scope reduction is substantial. A GmbH with 600 employees and €200 million turnover would have been squarely in scope under the original CSRD. Under the revised thresholds, it’s out. Audit partners who have been pitching CSRD readiness assessments to these clients should recalibrate: the conversation shifts from mandatory compliance to voluntary reporting and value chain information requests from larger customers.

Worked example: planning a CSRD sustainability assurance engagement

Client scenario: Müller Fertigung GmbH is a non-listed German manufacturing company with 1,200 employees, €520 million net turnover, and €180 million balance sheet total for FY2027. Müller Holding AG, listed on the Frankfurt Stock Exchange, is the sole shareholder.

Step 1: Determine CSRD wave and applicability

Müller Fertigung GmbH is non-listed with more than 250 employees, placing it originally in Wave 2. Under Stop-the-Clock, its first reporting year is FY2027. Applying the Omnibus I thresholds: 1,200 employees (above 1,000) and €520 million turnover (above €450 million). Both met. Müller Fertigung remains in scope.

Step 2: Assess the subsidiary exemption

If Müller Holding AG (the listed parent) prepares a consolidated CSRD sustainability report that includes Müller Fertigung GmbH, the subsidiary can claim the exemption under Article 19a(9) of the amended Accounting Directive. Under Omnibus I, even large listed subsidiaries can now use this exemption. Obtain confirmation from the group auditor on whether Müller Fertigung is included.

Step 3: Verify the engagement partner’s sustainability auditor registration

The engagement partner must be registered as a Nachhaltigkeitsprüfer with the WPK. Confirm that the 40-hour CSRD training has been completed and that registration is current (or pending the CSRD-UmsG entering into force). If the act hasn’t been passed by the engagement date, document the training hours completed and the expected registration timeline.

Step 4: Scope the limited assurance engagement

The engagement covers the sustainability report within the Lagebericht, prepared under ESRS. Limited assurance requires understanding how the entity collects sustainability data, assessing the control environment over that data, performing analytical procedures on disclosed metrics, and enquiring of management. Reasonable assurance testing depth is not required (confirmed by Omnibus I).

Step 5: Evaluate the LkSG substitution option

Müller Fertigung GmbH, with 1,200 employees, may have existing reporting obligations under the LkSG (Supply Chain Due Diligence Act). Under the draft CSRD-UmsG, the CSRD sustainability report can replace the LkSG report. Confirm whether the client currently files under LkSG and advise on the substitution to eliminate duplicated reporting.

Conclusion: Müller Fertigung GmbH is in scope for CSRD reporting from FY2027 unless exempted through the parent’s consolidated report. The engagement partner must hold or be eligible for the WPK sustainability auditor registration. Limited assurance is the permanent standard. Fees go on a separate line from the financial statement audit.

Practical checklist for German sustainability assurance engagements

1. Confirm whether the CSRD-UmsG has entered into force. As of March 2026, it had not. Monitor the Bundesgesetzblatt for publication. Until the act is law, there is no domestic legal basis for mandatory CSRD reporting or sustainability auditor registration.
2. Apply the Omnibus I scope thresholds: both 1,000+ employees and €450 million+ net turnover. If the client falls below either threshold, document the expected scope exit. If the client was previously in scope and has already invested in ESRS readiness, advise on whether voluntary reporting adds value.
3. Verify that the engagement partner has completed the 40-hour CSRD training and holds (or is eligible to hold) the WPK Nachhaltigkeitsprüfer registration. If registration isn’t yet possible, document training hours completed and set a trigger to register once the law enters into force.
4. Check the subsidiary exemption. If the client is a subsidiary whose parent prepares a consolidated CSRD sustainability report, obtain written confirmation of inclusion. Under Omnibus I, large listed subsidiaries can also use this exemption.
5. Scope as limited assurance. Do not plan for reasonable assurance (removed by Omnibus I). Quote sustainability assurance fees separately from the statutory audit and note the fee cap exemption. Structure the engagement letter to clearly separate assurance work from any advisory services.
6. For FY2024 and FY2025 reporting periods, advise the client to follow IDW and DRSC guidance: use the ESRS as the non-financial reporting framework under § 289d HGB. Sustainability information for these years is subject to a presentation review under § 317(2) sentence 4 HGB, not limited assurance. Document this distinction in the engagement file to avoid scope confusion.

Common mistakes on German CSRD engagements

• Attempting to register as a sustainability auditor before the CSRD-UmsG enters into force. The WPK cannot process registrations until the legal framework exists. Complete the 40 hours of training now, but formal registration must wait. Note that the IDW’s “Sustainability Auditor IDW” designation is a professional recognition from the institute, not the statutory WPK registration that the draft law requires.
• Pricing a CSRD sustainability assurance engagement for reasonable assurance. The Omnibus I provisional agreement of December 2025 removed the obligation to transition from limited to reasonable assurance. Plan and price all engagements on a limited assurance basis. Firms that built reasonable assurance cost assumptions into multi-year proposals should revise those proposals before the next fee negotiation.

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Frequently asked questions

Further reading and source references

• CSRD (Directive 2022/2464): the Corporate Sustainability Reporting Directive, as amended by the Stop-the-Clock Directive and Omnibus I.
• CSRD-UmsG (Regierungsentwurf, 3 September 2025): Germany’s draft implementation act amending the HGB, AktG, WpHG, WPO, and LkSG.
• IDW opinions (14 November 2024 and 20 December 2024): on retroactivity and FY2024 reporting under German constitutional law.
• Omnibus I (Directive 2026/470, published 26 February 2026): revised CSRD scope thresholds, removal of reasonable assurance, and simplified ESRS.