Germany is poised to repeal its national Supply Chain Due Diligence Act (LkSG) and adopt the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), signaling a major shift in ESG regulation and carbon neutral strategy. Announced by the coalition parties CDU, CSU, and SPD in April 2025, the move aims to reduce administrative burdens while aligning Germany’s corporate governance with broader EU sustainability mandates. 

The LkSG, in effect since January 2023, requires companies with over 1,000 employees to conduct annual supply chain risk assessments, implement grievance mechanisms, and monitor suppliers. However, under the proposed change, reporting obligations will be abolished immediately and enforcement suspended—except for severe human rights violations—pending implementation of the EU-aligned law. 

While industry groups welcome the move as deregulatory progress, many businesses that have invested in LkSG compliance now face legal uncertainty. The transition to the CSDDD, which broadens ESG obligations to include indirect suppliers and downstream actors like recyclers, introduces new responsibilities—particularly regarding environmental risks and civil liability. 

The CSDDD’s implementation is expected to streamline compliance through reforms in the EU’s Omnibus proposals, including reduced monitoring frequency, limited obligations for SMEs, and a narrower focus on direct suppliers unless significant risks are identified further down the chain. These updates are seen as a balance between maintaining ESG accountability and minimizing regulatory strain on businesses. 

Despite regulatory easing, civil society groups strongly oppose the rollback. The “Initiative Lieferkettengesetz,” a coalition of over 140 NGOs, argues that abandoning the LkSG weakens corporate responsibility and undermines progress in ethical sourcing and environmental protection. 

As Germany prepares for this regulatory pivot, companies are urged to maintain their current due diligence systems and prepare for more expansive ESG reporting and compliance under the CSDDD—especially as the EU continues to integrate carbon neutral strategies into its legal framework. 

Sources: 

https://natlawreview.com/article/germanys-supply-chain-law-crossroads-implications-proposed-shift-csddd 

https://blog.3bee.com/en/germany-step-back-on-sustainability-abolished-the-supply-chain-act/