ESG sanctions at a glance: the cost of mistakes in reporting and supply chain obligations

Companies that breach ESG and supply chain obligations risk fines in the millions, penalties calculated as a percentage of annual turnover, seized goods or exclusion from public contracts, depending on the regulation. The EU Omnibus package made some rules less strict in 2026 and narrowed the group of companies they apply to. This article shows which sanctions apply under the CSRD, CSDDD, LkSG, CBAM, EUDR, PPWR, DPP and EmpCo, and from when.

As of September 2026. This article reflects the EU Omnibus I package, the planned reform of the LkSG and the latest postponement of the EUDR. This information is editorial content that should not be construed as legal advice. VERSO accepts no liability.

What sanctions apply for breaches of the CSRD, EU Taxonomy and SFDR?

There is no EU-wide, uniform set of sanctions for the CSRD. Each member state decides how to penalise errors in sustainability reporting. In Germany, this will be governed by the CSRD Implementation Act, which is still going through the legislative process. Until it enters into force, companies that were already required to report remain subject to the HGB rules on the non-financial statement. The government draft is based on the existing criminal and administrative penalty provisions in §331 and §334 HGB. In figures, this means:

• Prison sentences of up to 3 years
• For members of authorized representative bodies or supervisory boards of a corporation: prison sentences of up to 3 years; companies face fines of up to 2 million euros or twice the economic benefit they have derived from the incorrect report – whichever is higher.
• For capital market-oriented companies: Fines of up to 10 million euros, 5 percent of annual turnover or twice the economic benefit – the highest amount is also chosen here.

On top of this – as the fermented icing on the cake, so to speak – there may also be legal action for breach of competition law, exclusion from public procurement procedures and “naming and shaming”, i.e. publicity including loss of reputation.

Important to know: Only intentional errors and errors due to gross negligence are punishable.

In the next few years, the first court proceedings will show the exact direction of sanctions for breaches of the EU taxonomy, CSRD and SFDR.

Read more:

• Factsheet on the CSRD
• Guidelines: Developing an effective sustainability strategy
• How VERSO supports the SFDR
• How VERSO makes CSRD reporting easier

Sanctions for LkSG and CSDDD

How high are the fines under the CSDDD?

With the Omnibus I package, the EU significantly weakened the CSDDD, the European supply chain directive, in 2026. This also affects the sanctions. Companies that breach their due diligence obligations for people and the environment face:

• Fines of up to 3% of global net turnover.
• Civil liability for damages. The EU-wide harmonised liability rule was removed; liability is now governed by the law of each member state.
• Naming and shaming and exclusion from public procurement.

What does a breach of the German Supply Chain Act (LkSG) cost?

In contrast to the CSDDD, the German Supply Chain Act does not create its own civil liability. The LkSG requires companies to meet human rights and environmental due diligence obligations in their own business operations and towards direct suppliers. For indirect suppliers, the obligations apply as soon as the company has substantiated knowledge of possible violations. Risks must be identified, documented and eliminated or at least minimised.

Previous fine framework: fines of up to 8 million euros. For companies with an annual turnover of more than 400 million euros, the fine increases to up to 2% of global annual turnover. And: companies can be excluded from public procurement.

What is set to change: in September 2025, the German government adopted a reform of the LkSG; the legislative process is still ongoing. Under the reform, the annual reporting obligation is to be abolished retroactively. Fines are only to be imposed for serious violations that lead to grave human rights abuses. The due diligence obligations themselves remain in place. In practice, the Federal Office for Economic Affairs and Export Control (BAFA) has already suspended the reporting obligation. In the medium term, the national implementation of the CSDDD is to replace the LkSG.

Read more:

• Factsheet: CSDDD vs. LkSG
• Whitepaper: Due Diligence in the supply chain
• Practical guide: Risk Analysis in the Supply Chain
• How VERSO supports you with the implementation of CSDDD and LkSG

EU ETS and CBAM sanctions

EU ETS

With the EU Emissions Trading System (EU ETS), the EU aims to cap the emissions of the member states. Companies only have a certain amount of freedom to emit emissions – otherwise certificates must be purchased. Non-compliance could result in fines:

• 100 euros per metric ton of CO2 equivalents emitted without a certificate (adjusted annually for inflation)

In order to avoid certificate prices on the one hand and sanctions on the other, some companies relocated their production to non-EU countries (“carbon leakage”). The CBAM was therefore also introduced as part of the EU ETS reform.

What sanctions apply under the CBAM?

The definitive phase of the CBAM has been running since 1 January 2026. Companies that import certain emission-intensive goods such as steel, aluminium, cement or fertilisers from non-EU countries need the status of authorised CBAM declarant and must buy and surrender CBAM certificates for the embedded emissions.

Relief from the Omnibus package: companies that import less than 50 tonnes of CBAM goods per year are exempt from the obligations. This does not apply to electricity and hydrogen.

The so-called “climate tariff” supplements the EU ETS and provides for the following sanctions:

• Missing certificates: in accordance with the EU ETS, fines of EUR 100 per tonne of CO2 equivalent are imposed.
• Anyone importing CBAM goods without the status of authorized declarant must expect even higher penalties.
• In the event of violations, the authorised declarant status can be revoked. The company may then no longer import CBAM goods.
• For the transitional phase (2023 to 2025), incomplete, incorrect or missing CBAM reports were subject to penalties of 10 to 50 euros per tonne of unreported emissions.

Read more:

• Fit for CBAM: background, key data and requirements
• Decarbonizing the supply chain: How companies achieve their climate targets along the supply chain
• How VERSO supports you in implementing the CBAM

When do EUDR sanctions apply?

Supply chain officers and buyers must prepare themselves for even more sanctions. If you place products on the EU internal market whose production has come at the expense of forests, you could face the following penalties under the EUDR:

• Skimming off profits unlawfully made as a result of non-compliance with the EUDR
• Fines in proportion to forest damage and value of goods, but at least 4 % of annual turnover
• Seizure of goods or products
• Temporary import bans
• Exclusion from public funds and public tenders
• Inclusion in a public list incl.
  Information on the violation

Also important: The EU has postponed the application of the EUDR once again. The obligations apply from 30 December 2026 for large and medium-sized companies and all traders, and from 30 June 2027 for micro and small enterprises. From then on, you may only place the relevant goods on the EU market if geolocation data and proof of origin are available. Keep this in mind today when ordering goods that will reach the EU single market from the end of December.

Read more:

• What companies can expect with the EUDR

What penalties apply for greenwashing under the EmpCo?

Since 27 September 2026, EmpCo has regulated misleading environmental claims and unlawful sustainability labels more strictly. In Germany, the requirements are implemented through the Act Against Unfair Competition. Violations may therefore primarily result in warnings, cease-and-desist claims, interim injunctions and legal action by competitors or associations.

In certain cases, fines may also apply. For widespread infringements, the fine can amount to up to EUR 50,000. For companies with annual revenue of more than EUR 1.25 million, the fine may amount to up to 4% of the affected EU annual revenue.

The European Commission halted the Green Claims Directive, which was intended to regulate environmental claims in addition, in June 2025. This makes EmpCo the relevant framework for environmental claims.

Read more:

• More about the anti greenwashing directive EmpCo
• The five biggest greenwashing traps and how to avoid them

What sanctions apply to the Digital Product Passport (DPP)?

With the Ecodesign for Sustainable Products Regulation (ESPR), the EU is gradually introducing the Digital Product Passport. It brings together information on a product’s materials, origin, reparability and environmental impact. Companies that fail to meet the requirements face sanctions. Member states set the level of fines, but the ESPR already provides for the following measures:

• Fines
• Withdrawal and recall of products
• Import bans
• Temporary exclusion from public procurement

The battery passport will be the first mandatory product passport from 18 February 2027. In Germany, incorrect or incomplete information can lead to fines of up to 10,000 euros. For other product groups such as textiles and furniture, the EU has yet to define the requirements.

Frequently asked questions about ESG sanctions