Between EU requirements and reduced burden: ESG in the coalition agreement

published on 17 April 2025 | Reading time approx. 3 minutes

With the new coalition agreement, the CDU, CSU and SPD want to send a clear signal in the direction of legal certainty and reducing bureaucracy – including in the implementation of EU requirements in the area of ESG. Small and medium-sized companies in particular should benefit from the planned relief.

The designated German government is likewise committed to the Paris Climate Agreement in its coalition agreement and is pursuing the goal of a climate-neutral Germany by 2045. The aim is to achieve a balance between climate protection, economic competitiveness and social equity. Innovations are to play a central role in the ecological transformation.

At the same time, the coalition parties emphasize the urgent need to significantly reduce the resulting bureaucracy for companies with regard to the numerous national and European ESG regulations that are intended to help achieve the climate targets.

Specifically, further burdens, especially for small and medium-sized enterprises (SMEs), are to be avoided through the following measures:

Support for the EU Omnibus Initiative:
The reduction and postponement of reporting obligations in the area of sustainability reporting proposed as part of the European Omnibus Initiative is expressly supported, particularly with regard to SMEs. The postponement for certain companies in the user group of the CSRD, EU Taxonomy and CSDDD was already finally adopted by the EU Council on April 14, 2025. Once adopted, the legislative act is published in the Official Journal of the EU and enters into force on the day following this publication. The directive must be transposed into German law by the new federal government by December 31, 2025.
Abolition of the Supply Chain Due Diligence Act (LkSG):
The German government plans to abolish the LkSG and replace it with a “low-bureaucracy and enforcement-friendly” national implementation of the Corporate Sustainability Due Diligence Directive (CSDDD). The LkSG reporting obligation currently applicable to companies in the user group is to be abolished immediately and completely eliminated. Furthermore, sanctions relating to due diligence obligations are to be suspended until the new law comes into force. Explicitly excluded from this are massive human rights violations.
No sustainability reporting for municipal companies:
The coalition parties would like to work at EU level to ensure that municipal companies fall under the definition of SMEs in future. As a result of this measure, municipal companies would no longer be part of the CSRD user group and would therefore not have to prepare a sustainability report.
No application of the EU Deforestation Regulation (EUDR):
Furthermore, companies are to be relieved of the EUDR – applicable from December 30, 2025 – by the introduction of a “no risk variant”.

It remains to be seen how the planned changes will be implemented by the new legislator. However, one thing is clear: the coalition parties want to actively push ahead with the bureau-cracy reduction course already set by the EU with the Omnibus Initiative – and thus create noticeable relief for companies. While EU directives such as the CSRD have a certain amount of leeway in terms of their specific legislative design due to the need to transpose them into national law, the German government also wants to explicitly limit excessive regulations and extensive delegated acts – i.e. EU regulations that apply directly in the member states.

The coalition agreement still requires the approval of the parties involved. This is expected to take place by the end of April. It can then be signed. In addition, the election of the Federal Chancellor and the allocation of ministerial posts are still pending before the future federal government can take up its work. It will also be interesting to see where tensions could arise between the planned national relief measures and existing European regulation. While there is some leeway in the national implementation of directives such as the CSRD or CSDDD, this does not apply to directly applicable EU regulations such as the EU Deforestation Regulation (EUDR). Here, too much national relief - for example by introducing a “zero-risk variant” - could be legally contestable and lead to conflicts with the EU Commission.

We will keep you up to date on all relevant developments and legislative steps.