LkSG: Due Diligence Duties Remain

Germany’s Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG) has been in force since 2023, requiring large companies to systematically identify and mitigate human rights and environmental risks in their supply chains. The Federal Ministry of Labour and Social Affairs (BMAS) has now published a draft bill to amend the LkSG, which is set to apply retroactively from January 1, 2023.

The core message: reporting obligations will be abolished, but due diligence obligations remain intact. The aim is to relieve companies of administrative burden while maintaining responsibility for protecting people and the environment.

Key Elements of the Amendment

1. Abolition of the Reporting Obligation

Companies will no longer be required to publish annual LkSG reports detailing their risk analyses, preventive measures, and results.

2. Due Diligence Obligations Remain

The substantive duties – risk analysis, implementation of preventive and remedial measures, and the establishment of grievance mechanisms – remain in force. Companies must continue to implement these, even without the requirement to formally report.

3. Narrowed Scope of Sanctions

Fines will only apply in cases of serious violations, such as failing to implement preventive measures or failing to establish a grievance procedure. An inadequate risk analysis alone will no longer be directly sanctionable.

4. BAFA Oversight Continues

The Federal Office for Economic Affairs and Export Control (BAFA) will continue to act as supervisory authority. It will still review whether companies are adequately fulfilling their human rights and environmental due diligence obligations.

Political Context

The amendment reflects Germany’s broader debate on reducing bureaucracy and safeguarding competitiveness. Business associations had argued that reporting obligations imposed high costs with limited benefits.

At the same time, the LkSG is situated within the larger framework of the EU Corporate Sustainability Due Diligence Directive (CSDDD), which will eventually need to be transposed into national law. The amended German law is therefore seen as a transitional measure until EU-level requirements are finalized.

Implications for Companies

Relief from Formal Obligations

Abolishing the reporting duty significantly reduces administrative workload. Estimates suggest companies could save around €4.1 million annually in compliance costs.

Ongoing Responsibility

Despite this relief, companies remain bound by due diligence obligations. They must continue to assess risks, implement measures, and provide grievance mechanisms.

Risk of Reputational Damage

Even without mandatory publication, companies that neglect their obligations face reputational risks. Civil society, media, or business partners may still expose shortcomings.

Supply Chain Pressure

Many international customers – especially large OEMs – demand robust ESG data from suppliers, regardless of statutory reporting duties. Companies that cannot provide transparency may lose business opportunities.

Why Supply Chain Risk Management Remains Strategically Important

The draft removes formal reporting but does not change the strategic reality: supply chain risk management remains critical.

Access to financing: Banks and investors increasingly require evidence of responsible supply chain practices as part of ESG risk assessments.
Market access: Public procurement and international clients often require ESG disclosures. Without them, companies risk exclusion.
Resilience: Companies that know their supply chains and actively manage risks are better protected against disruptions, crises, or scandals.
Reputation: Responsible supply chain practices are a growing factor in competitiveness, influencing purchasing decisions and investor trust.

International Perspective

Germany is not alone in introducing such rules. Other jurisdictions are advancing similar requirements:

France’s Loi de Vigilance requires companies to conduct human rights due diligence.
Norway’s Transparency Act obliges companies to disclose human rights risks.
The US has implemented import bans on products linked to forced labor.

For globally active companies, this means that even without German reporting obligations, international standards and growing ESG expectations remain highly relevant.

Outlook

The BMAS draft is scheduled for Cabinet approval on September 3, 2025. It must then pass through the Bundestag and Bundesrat. While some amendments may occur, fundamental changes are unlikely.

In the long term, Germany’s law will be replaced by the CSDDD, once finalized at the EU level and transposed into national law.

Conclusion

The planned LkSG amendment offers administrative relief but does not amount to deregulation. Due diligence obligations remain unchanged, and companies are still responsible for managing human rights and environmental risks in their supply chains.

For companies this means:

Less bureaucracy,
But ongoing expectations for risk management, preventive measures, and transparency.

Those that use this transitional phase to embed supply chain management strategically will not only be prepared for EU-level rules but will also gain competitiveness, resilience, and trust.

‍