European Supply Chain Law: Everything about the guidelines for sustainable business
Because social minimum standards in human and labour law are being disregarded, people worldwide are living in need and misery. Children's labour and forced labour are particularly affected by this. However, ecological minimum standards that serve environmental protection are also not being implemented in many companies.
To change these conditions and commit companies to consistent and transparent implementation, a legislative proposal for sustainability reporting obligations (CSRD) was approved by MEPs in the EU Parliament on June 1st, 2023. This relates to non-financial reporting. In addition, the EU Supply Chain Act (Corporate Sustainability Due Diligence Directive – CSDDD) was developed. Following Omnibus I, the CSDDD remains in force, but its scope has been significantly restricted. Member states must implement the directive into national law by July 26th, 2028; application for affected companies will begin uniformly on July 26th, 2029.
Currently, the European Commission is working on the so-called Omnibus Regulation. This is intended to simplify existing regulations such as the CSDDD and the CSRD, reduce bureaucracy for companies, and make sustainability reporting requirements more practical.
The German Supply Chain Due Diligence Act is likely to be amended as part of the implementation of the CSDDD; the specific German version has not yet been finally determined.
What obligations now arise from the decisions made in the EU Parliament and the German federal government?
- The company management must integrate the requirements of the respective national legislation into its corporate organisation.
- The European Supply Chain Act aims to combat human rights violations such as slavery, child labour, exploitation, or environmental pollution.
- Member States must lay down penalties; under Omnibus I, the national upper limit for fines must not exceed 3 % of global net turnover.
The European Supply Chain Law applies to companies that have their registered office or a branch in the EU and employ more than 250 employees.
- Following Omnibus I, only very large companies exceeding 5,000 employees and a global net turnover of more than €1.5 billion will be covered in future; the directive will apply uniformly from 26 July 2029.
- While smaller and medium-sized enterprises are generally not directly affected, they can indirectly be impacted by the compliance requirements of their business partners as suppliers.
What is the EU Supply Chain Act?
The European Corporate Sustainability Due Diligence Directive (CSDDD) is a law by the EU Commission that came into effect in July 2024. The objectives of the proposed directive are similar to those of the German Supply Chain Due Diligence Act (LkSG), are however more far-reaching in some respects. It is intended to promote responsible business practices and ensure that companies that do not comply with ethical standards held accountable. The German Supply Chain Due Diligence Act has been in effect since 2024 for companies with 1,000 or more employees. The CSDDD, according to Omnibus I, now only covers very large companies; a general threshold of 250 employees is no longer foreseen.
The CSDDD requires companies to:
- To systematically identify and mitigate supply chain risks.
- To implement human rights and environmental standards.
- Complaints procedure to set up and Handle information confidentially.
- Regularly report on measures, insofar as reporting or disclosure obligations apply.
The European Supply Chain Act aims to make standards for the protection of human rights and the environment more tangible. The goal is a fair and sustainable global economy as well as responsible corporate governance.
Welche Unternehmen sind von dem EU-Lieferkettengesetz betroffen?
Under the revised version, the EU's supply chain law will only affect very large companies that exceed the increased thresholds. Certain companies from third countries may also be covered, insofar as the directive so provides.
26 February 2026: |
The Omnibus I amending directive was published in the Official Journal on 26 February 2026 and entered into force 20 days later; however, the CSDDD will only apply to affected companies from 26 July 2029. |
26th July 2028: |
EU member states must transpose the CSDDD into national law by 26 July 2028; in Germany, this will likely be done through the LKsg adjusted. |
The scope of the directive has been significantly restricted overall by Omnibus I; sector-specific tightening is no longer the main focus, with high company thresholds now being the most important factor.
What do companies need to consider?
The companies are responsible for the introduction and implementation of the European Supply Chain Due Diligence Act (CSDDD). European companies must A number of factors consider when ensuring their supply chains and production are compliant with the EU Supply Chain Act.
First, companies must ensure that all suppliers adhere to the Legal requirements fulfil. This includes them having the due diligence to examine the practices of their suppliers Carefulness ensure and take action to prevent human rights abuses and environmental protection violations. Furthermore, companies must also Monitoring strategies ensure compliance with regulations throughout their supply chains. Finally, companies must ensure that they adequately train their employees on the requirements of the European Supply Chain Law.
EU Supply Chain Due Diligence Act: These are the obligations for companies
- Integrating human rights and environmental due diligence into company processes.
- Investigation and prevention of negative impacts on human rights and the environment in the value chain.
- Establishment of a complaints procedure for reporting breaches of guidelines.
- Annual Report on Due Diligence and Implementation.
Amendments through the Omnibus Regulation for the European Supply Chain Act
With the „Omnibus Regulation“ The European Union will amend or update several existing regulations or directives simultaneously.
The European Commission is currently planning a significant initiative to simplify ESG reporting obligations, particularly with regard to the CSRD and CSDDD.
Key elements of the changes:
- The reform strengthens a risk-based approach; companies may focus more on direct business partners but must conduct further checks for plausible risks.
- A rigid restriction to Tier 1 suppliers describes the regulation too narrowly; the risk-based auditing approach is crucial.
- Enhanced due diligence obligations for indirect business partners only in cases of plausible risks or negative reports (e.g. by media/NGOs)
- Companies should nonetheless enforce their Code of Conduct throughout the entire value chain.
- Timely adjustments
- As a general rule, a review is scheduled every five years, but also on a case-by-case basis if new findings emerge or changes occur.
- The uniform application start date is after Omnibus on 26 July 2029.
- Liability
- A harmonised EU-wide liability regime has been scrapped; liability issues will therefore be governed more by national law.
These changes aim to reduce bureaucracy while simultaneously promoting sustainable corporate governance.
Why is a European supply chain law needed?
The aim of the European supply chain law is to, Responsible business practices to promote, protect people and the environment and to ensure that companies that do not adhere to ethical standards to be held accountable.
Even today, unfortunately, in many countries no laughing matter, that human rights are upheld and the environment is treated with respect. Child labour and forced labour is not uncommon, but is partly part of everyday life. Work under also life-threatening circumstances It is not isolated cases that have long-term and serious consequences for people's health. Environmental violations harm nature and animals – with devastating Implications for the future.
The European Supply Chain Act requires companies to, Sustainability principles and one Due diligence regarding human rights in your to include processes. Companies must also ensure that their suppliers also adhere to the guidelines in order to ensure compliance with the EU Supply Chain Act. This law is an important step forward in creating a more sustainable supply chain that promotes human rights, biodiversity, and environmental protection.
This is why the European Supply Chain Act is important:
- Protection of Human Rights (Prevention of Child Labour and Forced Labour, Wages below the Subsistence Level, Prevention of Work in Life-Threatening Conditions)
- Environmental protection (prevention of environmental exploitation and destruction, water and air pollution)
What are violations in the EU Supply Chain Act?
European companies are in the Responsibility to ensure that they and their suppliers uphold and promote human rights and environmental principles. Violations of the European Supply Chain Act can include companies failing to provide sufficient information about their approach to labour, employees and the environment Record, no reports on this Providing or taking no action to prevent human rights violations.
Companies can also fall foul of the law if they engage in activities that involve forced labour, child labour, or the exploitation of workers. Furthermore, companies must adhere to the Requirements to comply with responsible sourcing and ensure their suppliers adhere to applicable labour, health and safety standards.
These violations fall under the EU Supply Chain Act.
- Violation of human rights (liberty and security of person, legal capacity)
- Non-compliance with safety regulations (working in life-threatening conditions)
- Violation of fundamental employee rights (child labour, forced labour, rest & leisure)
- Violation of the protection of biodiversity and ecosystems
- Pollution of water and air
- Violation of climate change countermeasures
How are these violations punished?
Companies can be penalised in various ways for breaches of the European Supply Chain Act. In future, the specific details of fines, liability and regulatory measures will be governed more closely by national law. Under Omnibus I, the national upper limit for fines must not exceed 3 % of global net turnover; a uniform EU liability regime has been scrapped.
EU Supply Chain Law and German Supply Chain Law: What are the differences?
The European Supply Chain Act and the German Supply Chain Act both aim to, Responsible business practices to promote in Europe by Minimum standards to establish for workers' rights, environmental protection, and human rights.
The EU Supply Chain Act is framework legislation for very large companies in the European market, while the German Supply Chain Due Diligence Act already today applies directly to specific companies with a connection to Germany.
This equation is no longer correct: The LkSG has applied since 2024 to companies with 1,000 or more employees, whereas the CSDDD under Omnibus I now only applies to companies with more than 5,000 employees and net turnover exceeding €1.5 billion.
Companies should align their processes to take into account both the current requirements of the LkSG and the foreseeable obligations arising from the CSDDD; currently, the LkSG remains more practically relevant than the CSDDD for many companies in Germany.
What are the implications of the new coalition agreement of 14/04/2025 for the German Supply Chain Due Diligence Act?
A definitive repeal of the LkSG cannot currently be presented as the applicable legal situation. At most, it is permissible to point out that political discussions about a reform or adaptation of the LkSG are continuing in light of the CSDDD.
Conclusion on the European Supply Chain Act
The EU Supply Chain Act is a important step to create a more sustainable, responsible, and ethical working environment in Europe and with suppliers worldwide. Affected companies must take measures to comply with applicable due diligence obligations; for many companies in Germany, the LkSG will remain primarily relevant until the implementation of the CSDDD.
An effective, easily accessible Complaints or reporting system Remains a central building block of effective compliance structures in practice.
Especially Digital whistleblower systems are well-suited for anonymous reporting and the implementation of a standardised complaints procedure.
(The male form used refers to all persons, regardless of gender.)
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