The Supply Chain Due Diligence Act (LkSG) is undergoing radical change:
Since 3 September 2025, a government draft bill to amend the Supply Chain Due Diligence Act has been available, which no longer provides for reports and contains fewer grounds for fines – it is to apply until the Corporate Sustainability Due Diligence Directive (CSDDD) is implemented. On 26 September 2025, the Federal Ministry for Economic Affairs and Climate Protection (BMWK) instructed the Federal Office for Economic Affairs and Export Control (BAFA) to only pursue “serious” violations. Since 7 November 2025, the BAFA’s previous digital reporting form, which companies had to use to submit their legally required annual reports, has also been deactivated.
On 16 January 2026, the Bundestag debated the draft bill for the first time, together with a motion by the AfD to completely abolish the LkSG and a motion by the Linke Party to amend the law. The motions have been referred to the committees under the leadership of the Committee on Employment and Social Affairs.
Key changes in the LkSG amendment
The government draft proposes streamlining the LkSG for the transition phase until the European CSDDD is implemented in national law, thereby reducing the bureaucratic burden on companies.
A key change is the retroactive abolition of the reporting obligation from 1 January 2023. Companies will no longer be required to submit reports to the BAFA; the reporting obligation had already been de facto suspended since autumn 2025, even before the law was formally amended. It should be noted, however, that the obligation to maintain internal documentation in accordance with the LkSG remains unchanged – only reporting to the BAFA is no longer required. In addition, sustainability reporting under the CSRD remains mandatory if the company falls within the scope of the CSRD; its threshold has recently been significantly increased (1,000 employees and €450 million in turnover).
The draft law also aims to reduce the range of sanctions for violations of the LkSG. According to the government draft, only the following intentional or negligent acts will constitute an administrative offence:
- Failure to take or delay in taking prevention measures in the event of a human rights risk
- Failure to take or delay in taking remedial measures in the event of a human rights risk
- failure to draw up or implement a concept to remedy a human rights risk, or failure to do so in a timely manner
- Failure to establish or implement a complaints procedure
The central due diligence obligations of the LkSG for companies with 1,000 employees in Germany – in particular, risk management and analysis, preventive and remedial measures, the provision of a complaints procedure and documentation – remain in place in the context of the amendment.
Recently, however, 17 trade associations have called for the LkSG to be suspended until the CSDDD comes into force.
Classification in the European context
The amendment to the LkSG is clearly at odds with European legal developments. At EU level, a political agreement was reached in mid-December 2025 as part of the Omnibus I package, which significantly narrows the scope of the CSDDD. According to this agreement, only companies with at least 5,000 employees and an annual turnover of €1.5 billion will be subject to European due diligence obligations in future. At the same time, the implementation timetable has been extended: Member States are to implement the directive by 2028 and it will come into force in 2029.
In view of these European reforms, the question arises as to whether it makes sense to leave the application threshold of the LkSG unchanged at 1,000 employees in Germany. The CSDDDD will in any case have to be transposed into German law, and according to the directive, national regulations may not be stricter than the European minimum requirements in future. It would therefore make sense to design the transitional arrangement in such a way that the LkSG already only applies to those companies that will also fall under the CSDDD in the future. However, the Federal Government had already explicitly rejected this after a corresponding proposal by the Bundesrat last autumn.
Conclusion and outlook
The LkSG amendment reduces the bureaucratic burden on companies and significantly weakens the sanctions framework but remains only a provisional step in relation to European sustainability developments. The CSDDD will completely reorganise the European due diligence regime and limit it to significantly larger companies. However, structurally similar risk-based approaches are also to be chosen. With its risk-based approach, the CSDDD even goes beyond the LkSG. The directive requires companies to examine their deeper supply chains for human rights and environmental risks, thus demanding more than the LkSG, which limits risk analysis to direct suppliers as standard. However, the text of the CSDDD stipulates that areas where risks are unlikely and not serious, as well as areas not related to the manufacture of the company's own products or the provision of services, can be completely excluded from the risk analysis. It makes sense that this even more risk-based approach of the CSDDD can already be applied under the LkSG due to the current simplifications. However, the possibility of proceeding in this manner has not yet been confirmed by official statements.
Taylor Wessing has many years of experience and expertise in advising on corporate due diligence obligations, in particular on the national LkSG and on European legal developments relating to CSDDD and CSRD. If you have any questions or require advice, please do not hesitate to contact our team of experts.
