Supply Chain Act: New Draft (August 2025) – What It Means for Companies

Germany’s Supply Chain Due Diligence Act (LkSG) has applied since 2023 (3,000+ employees, since 2024: 1,000+). It requires risk analysis, preventive and corrective measures, grievance procedures, and annual reports on human rights and environmental due diligence.

In August 2025, the government presented a draft amendment to ease the law until the EU directive (CSDDD) takes effect in 2027.

Key Changes

1. Reporting duty removed – no more annual LkSG reports (retroactive to 2023). Saves cost and admin.

2. Sanctions narrowed – fines only for serious violations (no prevention/remediation of human rights risks, no grievance mechanism).

3. Obligations remain – risk management, risk analysis, prevention, remediation, grievance procedures, and internal documentation unchanged.

4. EU rules ahead – from 2027 stricter requirements again, with broader scope (e.g. land rights, freedoms, climate).

CSDDD Outlook: By 26 July 2027, Germany must transpose the EU Corporate Sustainability Due Diligence Directive (CSDDD) into national law. This directive expands the risk catalogue and creates new due diligence obligations. Companies will have to address risks such as:

• Torture or cruel, inhuman, or degrading treatment,

• Threats to freedom, security, or privacy of individuals,

• Violations of freedom of thought, conscience, or religion,

• Land dispossession.

This will significantly broaden corporate responsibility compared to today’s LkSG. Advisory Boards and Board of Directors will still maintain the oversight and liability.

Key Takeaways for Companies

• Less bureaucracy: Reduced reporting burden, esp. for mid-sized firms.

• Shift in focus: Effectiveness over paperwork.

• Core duties stay: Internal documentation and risk management remain essential.

• Residual risk: Major breaches still mean high fines + public tender bans.

• Outlook: Transitional relief only – EU directive will tighten rules from 2027.