CSR reporting obligation becomes legally mandated in Germany

The act for strengthening the non-financial reporting of companies in their management reports or group management reports will require large capital market oriented companies as well as large credit institutions and insurance companies that employ an annual average of more than 500 staff to include information on their corporate social responsibility (CSR) about significant non-financial matters in their management reports. These comprise environmental aspects such as greenhouse gas emissions and air pollution, employee and social issues, respect for human rights as well as preventing and countering bribery and corruption. If any of these aspects are relevant for the development of business, then the management must provide more detail as to how it is handled, for example by providing information on concepts, due diligence processes or performance indicators.

An additional new development stipulates that corporations must include a description of the concept of diversity in their corporate governance statement “in regard to the composition of the representative bodies and the supervisory board in terms of aspects such as age, gender, educational or professional background,” as the draft bill states. The aims of this diversity concept, how it is implemented and the results that were achieved in that financial year must also be reported.

The new regulations are to be applied for the first time for financial years beginning after 31 December 2016. The reporting should generally be made in the group management report, though it can also be made in another established reporting form. In any case, a number of formal aspects must be observed. The draft bill published by the Federal Ministry of Justice and Consumer Protection is available here for download [DE].