CSRD requirements for supervisory boards and supervisory advisory boards
Find out which CSRD requirements arise for supervisory and advisory boards from sustainability reporting – and how they can meet their oversight duties.
- The CSRD raises the bar for supervisory boards: sustainability expertise, governance disclosures, and incentive schemes all become mandatory reporting topics.
- Under the Omnibus rules (in force since 18 March 2026), only companies with more than 1,000 employees AND more than €450m net turnover are still in scope.
- Supervisory boards must disclose their composition, sustainability expertise, and how material impacts, risks, and opportunities have been addressed.
- Climate-related remuneration disclosures are now required under ESRS E1 for companies that remain in scope.
- A sustainability committee alongside the audit committee may become best practice for larger boards.
The Omnibus package has been in force since 18 March 2026. Reporting is now only required for companies with more than 1,000 employees AND more than €450m net turnover. Some details in this article were written before these changes took effect. All governance and disclosure content remains valid for companies that remain in scope.
The Corporate Sustainability Reporting Directive (CSRD) places extensive requirements on companies and supervisory boards when it comes to sustainability reporting. With the inclusion of sustainability reporting in the management report of the annual financial statements, this takes on the character of accounting law. For companies with supervisory boards under the law, or controlling advisory boards under the articles of association, the requirements for the board and its individual members will grow considerably. You can build the necessary knowledge through CSRD training or webinars. Large consulting firms also offer specialist courses tailored to supervisory boards.
Core tasks of the Supervisory Board
The primary tasks of the Supervisory Board can be summarized as follows:
- The Supervisory Board is responsible in particular for the ongoing control and monitoring of the management (Section 111 (1) AktG).
- A catalog of transactions requiring approval can be defined.
- The Supervisory Board is also responsible for appointing and dismissing members of the Management Board (Section 84 AktG).
- Monitoring and reviewing the appropriateness of and compliance with an internal control system (ICS), a risk management system (RM), and a compliance management system (CMS).
- The audit of the annual financial statements and the management report (including a separate non-financial report, if applicable), as well as the proposal for the appropriation of profits (Section 171 AktG).
In addition to monitoring activities, appropriate qualifications are also required for the accompanying advisory function. These should ideally be documented in the form of competence profiles and qualification matrices.
CSRD requirements for supervisory boards and supervisory advisory boards
The German Corporate Governance Code (GCGC) requires that the Supervisory Board's function of monitoring and advising the Management Board also covers sustainability issues (GCGC 2022, Principle 6). Section C.1 recommends that the competence and qualifications of the Supervisory Board should include expertise on sustainability issues of importance to the company.
Regarding the internal organization of the Supervisory Board: while there is a requirement to form committees at larger companies to improve effectiveness, such as an audit committee, there is no explicit recommendation yet to establish a sustainability committee (GCGC 2022, Principle 14).
The role of the Supervisory Board under the CSRD
The reporting obligations set out in the European Sustainability Reporting Standards (ESRS), which specify the CSRD, are relevant to supervisory bodies for two reasons. The breadth of reporting points is substantial in itself, and specific points in the ESRS also require information on how governance structures are organized within the company.
The following CSRD requirements for supervisory boards result from the ESRS:
Expert knowledge with regard to sustainability aspects (ESRS 2 GOV-1)
The company must disclose the composition of the administrative, management, and supervisory bodies, their duties and responsibilities, and their access to expertise and skills relating to sustainability aspects.
The aim is to provide an understanding of how responsibilities are distributed regarding the supervision of impacts, risks, and opportunities, and what sustainability expertise supervisory boards have or can access.
Specialist knowledge with regard to company policy (ESRS G1)
This covers information on the expertise of administrative, management, and supervisory bodies with regard to aspects of corporate policy. "Corporate policy" here refers to topics such as corporate ethics and culture, combating corruption and bribery, whistleblower systems, animal welfare, relationships with suppliers, and lobbying activities.
Referral to significant material impacts, risks, and opportunities (ESRS 2 GOV-2)
The Supervisory Board must list the material impacts, risks, and opportunities (IROs) relating to sustainability aspects that it has dealt with directly or via the relevant committees. These material IROs are determined in the course of the double materiality assessment.
In practice, this could mean that companies establish a sustainability committee alongside the audit committee. Due to the complexity of the requirements and the necessary separation of preparation and audit, external expertise from CSRD experts could be brought in.
Incentive schemes (ESRS 2 GOV-3)
The company must provide information on how sustainability-related aspects are included in incentive systems. This includes:
- Main features of the incentive systems
- Whether the assessment was based on specific sustainability-related objectives and/or impacts
- Whether sustainability-related performance parameters were included in the remuneration policy
- The proportion of variable remuneration that depends on sustainability-related targets
- The level of responsibility within the company that approves and updates the conditions of incentive systems
Remuneration (ESRS E1)
The E1 standard requires the company to disclose whether and how climate-related considerations are included in the remuneration of members of the administrative, management, and supervisory bodies. This includes:
- Whether performance was assessed against GHG emission reduction targets
- The percentage of remuneration linked to climate-related considerations
- An explanation of the climate-related considerations
The materiality assessment is the starting point for all ESRS governance disclosures. Our Excel template guides you through the full process, step by step.
Stakeholder dialogue
The ESRS standards require the inclusion of relevant stakeholder perspectives as part of the materiality assessment. Beyond that, capital market-oriented companies face growing expectations from investors and proxy advisors. They increasingly want to see evidence of appropriate qualifications on the supervisory board, integration of sustainability goals in management board incentives, and the anchoring of sustainability in the business model.
The XBRL tagging requirements introduced with the CSRD also mean that sustainability report information must be machine-readable. Combined with the use of AI, this will lead to more critical questions about the ambition and consistency of published sustainability activities.
A company's reputation will therefore also be shaped by its focus on sustainability governance in the future.
Investors and other financial market players will demand corresponding reports or statements on how the company deals with sustainability issues, as part of the Sustainable Finance Disclosure Regulation (SFDR), and take them into account when granting loans.
Liability avoidance through appropriate governance structures
The liability of the Supervisory Board is generally based on incorrect monitoring of the Management Board, in the sense of a breach of duty. The duties of the Supervisory Board are derived from the individual provisions of the German Stock Corporation Act (AktG), particularly Section 111, and from the general standard of conduct expected of a prudent and conscientious businessperson.
For CSRD reporting requirements, this includes reviewing sustainability-related disclosures in the management report, monitoring compliance with labor law in the company's own operations and in the value chain, and overseeing compliance issues. In all cases, effective control systems must be in place.
Regarding the composition and working structure of the Supervisory Board, the aim will be to demonstrate the necessary expertise and to document a sufficient time budget for discussing sustainability issues.
Other specific points to consider:
- Expanding the catalog of transactions requiring approval from a "double materiality" perspective
- Including sustainability aspects or expertise in any self-assessment of the board
- Establishing clear documentation of how IROs were addressed at board level
Conclusion
The growing list of tasks for supervisory boards will be expanded to include sustainability at the latest with the full validity of the CSRD and the EU taxonomy. For supervisory board members, this means developing a solid understanding of the challenges posed by sustainability reporting, as well as the opportunities that arise from a genuine transformation towards sustainability.
The breadth of the requirements speaks more in favor of a broad, qualified understanding within the board as a whole, possibly through further training, than in favor of relying on singular expert knowledge.
Frequently asked questions about CSRD requirements for supervisory boards
Which companies still need to comply with CSRD after the Omnibus changes?
Since 18 March 2026, the Omnibus rules are in force. Reporting is now only required for companies with more than 1,000 employees AND more than €450m net turnover. Both criteria must be met at the same time. Companies that previously fell under the old thresholds but are now below these figures are no longer in scope.
What sustainability expertise must a supervisory board have?
Under ESRS 2 GOV-1, companies must disclose the sustainability expertise that supervisory board members have or can access. This does not mean every member must be a sustainability expert, but the board as a whole needs sufficient understanding to oversee sustainability risks and opportunities. Training and competence profiles can help demonstrate this.
Does the supervisory board need to set up a sustainability committee?
There is currently no explicit recommendation to establish a sustainability committee in the German Corporate Governance Code. However, given the complexity of material IROs and the separation required between preparation and audit, a dedicated sustainability committee is becoming best practice for larger boards. External experts can also be brought in to support the board.
What are the consequences if a supervisory board fails to meet CSRD governance requirements?
Liability is based on incorrect monitoring of management, which constitutes a breach of duty. If effective control systems are not in place, or if sustainability disclosures in the management report are not properly reviewed, individual board members can face personal liability. Documented processes, competence matrices, and sufficient time allocation for sustainability topics are the main tools for reducing this risk.
Guest article written by Dr. Udo Zimmermann
Dr. Udo Zimmermann from Esslingen am Neckar is a qualified business economist and has worked for many years in positions of responsibility in trading and service companies, most recently for almost 20 years as managing director, particularly in medium-sized family businesses.
He recently set up his own business and passes on his experience in the form of advisory and supervisory activities. He is a member of the Initiative Beirat-BW e.V. as well as the FEA - Financial Experts Association e.V.
As a certified CSRD specialist, he also advises companies on the preparation and reporting of their sustainability management.
