Adopted in June 2021, the Lieferkettengesetz, or German Supply Chain Due Diligence Act was widely seen as a precursor to the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD). Since it’s implementation in January 2023, the mandatory human rights due diligence legislation has received both praise and criticism. Critics highlighting the increased financial costs, reduced competitiveness and supply chain burdens as negatively impacting business performance.
Since its introduction, the LkSG has required approximately 4,500 companies to develop human rights due diligence procedures aligned to the Six Stages of Due Diligence as outlined by the Organisation for Economic Cooperation and Development (OECD) in their Due Diligence Guidance for Responsible Business Conduct. For many German businesses, supply chain due diligence has long been a foundation of good corporate governance. However, under the Act, companies have also been required to submit an annual report to the German Federal Office for Economic Affairs and Expert Control (BAFA).
In 2024, the Mario Draghi’s report, The Future of European Competitiveness, echoed concerns raised by German business leaders and politicians. It’s findings and recommendations formed the basis of the EU’s strategic review on competitiveness and influenced the Omnibus Simplification Package. A regulatory review proposing major amendments to both CSDDD and the Corporate Sustainability Reporting Directive (CSDDD).
Fast forward to 2025: national and international politics have continued to complicate the landscape for LkSG. In April, Germany’s new coalition government announced plans to immediately abolish the LkSG, preferring to wait until the CSDDD comes into effect in mid-2028. This announcement has left many businesses in limbo with the Act still in force but reporting requirements effectively suspended.
Following the summer parliamentary, a draft bill to amend the LkSG was released. Key changes to the Act include:
- Retroactive amendment to reporting requirements – effectively eliminating all current and past reporting obligations.Reduced sanctions – meaning only serious violations would be subject to fines up to €800,000.
- Streamlined enforcement from BAFA – The Federal Office will no longer evaluate reports, instead focusing on guidance.
So, what does this mean for businesses today?
According to a recent legal update by multinational law firm Ropes & Gray, the practical impact is limited. Largely due to many companies already planning human rights and supply chain due diligence reporting due to CSRD and CSDDD, and BAFA has recently requested companies to outline their due diligence and risk analysis processes.
For many multinationals and large businesses, OECD-aligned supply chain due diligence predates much of the proposed legislation. Achilles has been helping clients assess and manage supply chain risks across a wide range of sustainability topics for 35 years. While the proposed amendments prove to be a useful political tool, they change very little for hundreds, if not thousands of responsible businesses.
If legal ambiguity or limited supply chain transparency is keeping you up at night, Achilles offers a comprehensive range of supply chain solutions that make regulatory compliance and supply chain assurance efficient and effective. Get in touch to learn more.
