Supply Chain Due Diligence Law (LkSG) – once up, once down

published on 30 April 2025 I reading time approx. 5 minutes

Few laws have been discussed as much in recent times as the Supply Chain Due Diligence Law (LkSG). Changes to the LkSG are being considered at both national and European level, some of which are becoming obsolete. But what is the current status and where could the short-term journey take us? We take a look at current developments and venture a look into the crystal ball.

The current status and national developments

The LkSG has applied since January 1, 2023 to companies that generally employ at least 1,000 employees in Germany and since January 1, 2024 to companies that generally employ at least 3,000 employees.

Even though the abolition and restriction of the LkSG has been increasingly discussed in the past, the LkSG has not yet been abolished or restricted.

In the past, for example, the CDU/CSU parliamentary group introduced a bill on 11. June 2024 that provided for the repeal of the LkSG. However, the Bundestag rejected the bill. And the last federal government's growth initiative published on 6 July 2024 was not implemented either, as it provided for the LkSG to be adapted to be as “bureaucracy-free as possible”. Despite this and many similar initiatives, the LkSG has remained unchanged to date.

And yet: on April 9, 2025, the CDU/CSU and SPD agreed on the new coalition agreement, which is to determine the government program for the next four years. The LkSG is given prominent consideration in it; from para. 1909 onwards, it states that the LkSG is to be abolished and replaced by a law on international corporate responsibility - which is intended to transpose the European Supply Chain Directive (CSDDD) into national law with little bureaucracy and in an enforcement-friendly manner. The LkSG reporting obligation will be abolished immediately beforehand. In addition, violations of the current mandatory due diligence obligations within the meaning of the LkSG are not to be sanctioned unless there is a massive violation of human rights. The EU Commission's so-called “Omnibus” would be supported. The omnibus initiative is an EU legislative procedure in which several laws (including the CSDDD) are amended simultaneously, partially combined and possibly partially repealed.

The european development

Following on from this, it can be said that the rapid developments with regard to the LkSG are also continuing at European level; the aforementioned omnibus in particular has further accelerated this. However, before discussing the current developments, it is important to shed light on the main features of the CSDDD:

On 5. July 2024, the CSDDD was published in the Official Journal at EU level. This should initially be implemented by the EU member states in their respective national legislation within two years (i.e. by July 2026). Until now, it was assumed that the CSDDD would be transposed into the LkSG and that the current LkSG would in turn be amended as a result of this transposition. After all, the CSDDD came closer and closer to the LkSG in previous draft versions, but there were still differences, according to which the LkSG would have had to be adapted - the original drafts of the CSDDD were “stricter” than the LkSG.

The EU omnibus initiative of 26. February 2025 has now brought the CSDDD closer to the LkSG, so that only a few differences remain. The omnibus for the CSDDD provides for the following changes compared to the previous drafts of the CSDDD:

Review obligations with regard to own business area and direct business partners; for indirect business partners only in the event of specific indications
Reviews of preventive measures and the effectiveness of risk management should only take place every five years or on an ad hoc basis
No (independent) civil liability in the event of a breach of the CSDDD
No obligation to automatically terminate a contract if the contractual partner (seriously) breaches due diligence obligations
The implementation deadline is to be postponed to July 2027

With the so-called “Omnibus: Stop the Clock” initiative, the European Parliament also decided on April 3, 2025 that, among other things, the implementation of the CSDDD should be postponed by one year - i.e. to July 26, 2027 as previously stated - and that companies that fall under the future law in the “first step” will have one more year to prepare. The EU Commission is currently preparing corresponding drafts.

What's next for the LkSG?

Nevertheless, or perhaps precisely because of this, it is currently completely unclear what will happen with the LkSG.

On the one hand, the coalition agreement states that the LkSG is to be replaced and that breaches of due diligence will (largely) not be sanctioned. In addition, the implementation deadline for the CSDDD is now likely to be postponed by a further year, meaning that the European implementation obligation will be delayed.

On the other hand, however, the LkSG (also according to the coalition agreement) will continue to apply, at least for the time being, and even if the breaches of due diligence are not currently to be sanctioned, they will remain in place for the time being (with the exception of the reporting obligation).

Furthermore, the question arises as to what extent a “law on international corporate responsibility” would deviate from a possibly adapted, less bureaucratic LkSG; after all, the framework is provided by the CSDDD.

Art. 1 para. 2 CSDDD states that the CSDDD “shall not serve as a justification for any reduction in the level of protection of human rights, employment and social rights or of environmental or climate protection provided for in the legislation of the Member States [i.e. including the LkSG]”. This passage represents the so-called prohibition of deterioration of the CSDDD and reveals not inconsiderable obstacles to amending or even repealing the LkSG. The prohibition of regression inherent in Article 20a of the Basic Law, which, among other things, protects the natural basis of life for future generations, is similar.

Even if it is not possible to predict the further development of the LkSG to a limited extent due to the legislator's indecisiveness as described above, it is nevertheless important to point out the not inconsiderable hurdles that would already exist for an amendment to the LkSG. As things stand at present, it can be assumed that - should the LkSG actually be abolished - the LkSG is likely to be replaced by a law with similar regulatory content. Changes could be achieved with regard to the legal scope of application and by reducing bureaucracy; however, this would be within the framework of the CSDDD and taking into account the applicable prohibitions on deterioration and regression. If the LkSG is not abolished, it should be adapted accordingly.

In conclusion, it can be said that companies that fall under the LkSG or are on the threshold of doing so have no choice but to closely monitor the next steps of the two legislators in order to be prepared for any obligations. It is very unlikely that the developments that have been initiated will be completely abolished again. In addition, numerous companies in the supply chain have already established company rules that have a de facto effect on contractual partners.