In April 2025, CDU, CSU, and SPD – the coalition parties almost certainly forming Germany’s next federal government – announced their intention to repeal the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz (LkSG)) as part of a broader initiative to reduce administrative and economic burdens. According to the coalition agreement, the LkSG shall be replaced with legislation implementing the EU Corporate Sustainability Due Diligence Directive (CSDDD) in a bureaucracy-light and enforcement-friendly manner. The reporting obligations under the LkSG shall be abolished immediately, and enforcement of existing obligations shall be suspended, except in cases of grave human rights violations, until the new EU-aligned framework enters into force and is implemented in German law.

This legislative shift is causing widespread uncertainty among companies, many of which have already undertaken significant efforts to implement the LkSG since it came into force in January 2023. [...]

While some industry associations have welcomed the repeal as a step toward deregulation, the announcement has also raised significant concerns within the business and legal communities. Numerous companies have already made considerable investments to comply with the LkSG, establishing compliance systems, internal governance structures, and supplier monitoring mechanisms. The prospect of a repeal, especially after only a short period of application, has introduced legal uncertainty and operational ambiguity, particularly with respect to future compliance expectations.

From a legal perspective, the formal abolition of the LkSG would require a new act adopted by the parliament. Earlier attempts to initiate such a legislative reversal failed due to insufficient parliamentary support. Nevertheless, the linkage of national legislation with the EU’s CSDDD offers a feasible path for reform by way of harmonized substitution rather than outright repeal. The CSDDD covers both human rights and environmental obligations and applies not only to direct suppliers but, under certain conditions, also to indirect supply chain actors. Notably, the CSDDD introduces civil liability provisions and imposes obligations on a broader spectrum of business activities, including downstream operations such as recycling and distribution. [...]

Meanwhile, supervisory authorities such as the Federal Office for Economic Affairs and Export Control (BAFA) have begun to enforce the LkSG with targeted inquiries and audits, particularly in high-risk sectors. These enforcement activities prompted many companies to accelerate their compliance efforts, contributing to the establishment of internal processes that may now remain relevant under the forthcoming CSDDD regime.

Considering the transitional phase between the phasing out of the LkSG and the implementation of the CSDDD, companies are advised to avoid dismantling existing due diligence systems prematurely. While certain regulatory relief may be on the horizon, reputational and legal risks remain, particularly in the event of adverse public exposure or litigation. Moreover, the CSDDD will introduce new obligations concerning environmental risks, for which most businesses will need to gather additional information and develop appropriate compliance tools.

In conclusion, the repeal of the LkSG marks a turning point in Germany’s supply chain regulation. While the transition to EU-level harmonization promises simplification in some areas, it also brings new challenges and legal uncertainties. Companies are well advised to maintain a forward-looking compliance posture, preparing not only for reduced national reporting burdens but also for the broader and more integrated responsibilities under the CSDDD.