Updated version – as of July 2026
Important note on the current legal situation (as of July 2026)
The legal situation surrounding the Supply Chain Act has significantly changed since 2024. This article has been updated accordingly. The most important new developments at a glance:
- The German LkSG has not been repealed and remains in force. However, the coalition agreement of 9 April 2025 provides for its replacement by legislation implementing the CSDDD.
- BAFA completely discontinued its review of the reporting obligation on 1 October 2025; reports can no longer be submitted.
- The EU CSDDD has been significantly simplified by the “Omnibus I” package: the threshold is now more than 5,000 employees and more than €1.5 billion in turnover, with a uniform application date of 26 July 2029.
German Supply Chain Due Diligence Act – what you need to know
The German Supply Chain Due Diligence Act was passed by the Bundestag on 11 June 2021. Since 1 January 2023, the Act has required companies with at least 3,000 employees to respect human rights in global supply chains. Since 1 January 2024, it has also applied to companies with at least 1,000 employees. As of July 2026, these thresholds formally remain unchanged.
At European level, the EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive, CSDDD) has entered into force. The European Commission presented its first proposal on 23 February 2022, and the European Parliament adopted its negotiating position on 1 June 2023. Directive (EU) 2024/1760 entered into force on 25 July 2024 and was significantly amended in 2025 and 2026 by the “Omnibus I” simplification package.
This post will tell you what you need to know about the German Supply Chain Due Diligence Act, how to implement its requirements when working with suppliers, and what is changing with the current reform.
What is the German Supply Chain Act?
The Act requires companies to respect human rights and environmental protection through defined due diligence obligations. For example, companies are required to establish a reporting channel for whistleblowers, referred to in the Act as a “complaints procedure”. German trade unions and NGOs also have the right to bring proceedings on behalf of affected individuals. This has strengthened the rights of affected persons.
Companies were previously required to submit an annual report on the fulfilment of their due diligence obligations to the competent authority. BAFA completely discontinued its review of this reporting obligation on 1 October 2025. Further information can be found in the section “Documentation and reporting”.
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Further informationWhich German Supply Chain Due Diligence Act applies – and from when?
Since 1 January 2023, the law has applied to companies with at least 3,000 employees in their home country. Since 1 January 2024, companies with usually at least 1,000 employees in their home country are also affected. The Application thresholds still apply. Foreign companies with a branch in Germany can also fall within the scope of application.
What obligations arise from the Supply Chain Act?
The law requires companies to adhere to human rights and environmental standards based on clearly defined due diligence obligations. These include:
Setting up effective risk management
Conducting regular risk analyses
Adoption of a statement of principles
Implementation of preventative and remedial measures
Establishment of a complaints procedure (e.g. whistleblowing system)
Annual documentation and reporting to the Federal Office for Economic Affairs and Export Control (BAFA)
What grievances is the law intended to prevent?
The duties of care apply to the own business area, but also for Contracting parties and suppliers. This is intended to ensure that human rights violations or environmental offenses are identified not only within one's own organisation, but also along the entire global supply chain, and that they are avoided in the future.
The law names and specifies the international conventions that set out human rights and environmental obligations. Supply chain risks defined. The law specifically provides, for example:
Protection against child labour, forced labour and discrimination
Protection against land grabbing
Health and safety at work
Right to fair wages
The right to form trade unions
Protection against environmental law violations
What provisions does the German Supply Chain Due Diligence Act establish for companies?
The obligations for companies can be broken down into the following six aspects:
1. Embedding risk management
The Supply Chain Act mandates that your company must establish adequate and effective risk management, enabling you to identify human rights and environmental risks. Responsibilities must be assigned accordingly for monitoring compliance with due diligence obligations.
2. Risk Analysis
Companies must identify and prioritise risks in their supply chains. Once risks are identified, appropriate preventative measures must be taken. This could include, for example, contractual human rights clauses in agreements with suppliers or the implementation of training.
3. Guiding Principles
Building on the results of the risk analysis, a fundamental statement will be published. This is a written declaration in which a company expresses its commitment to complying with legal requirements and promoting human rights as well as environmental and social standards in its supply chain. This statement is intended to make it transparent that the company is aware of its responsibility and is taking measures to identify and mitigate supply chain risks and to prevent human rights and environmental standard violations.
4. Preventive measures and remediation plan
Furthermore, companies will be obliged to implement prevention measures for their own business operations and those of their suppliers. The effectiveness of these measures must be checked on a case-by-case basis, but at least once a year. Examples of prevention measures include codes of conduct or purchasing guidelines that enshrine respect for human rights. This also includes contractually agreeing on audit rights with suppliers, which allow for regular on-site checks.
5. Establishment of a complaints procedure
To allow injuries to be reported, you as a company must have a reporting channel (Complaints procedure) to establish. This enables both internal and external stakeholders to report potential human rights or environmental protection violations. Your company is free to develop such a complaints procedure itself or to use that of a third party, such as the digital LegalTegrity Whistleblowing System, to use. The target audience for the complaints procedure are all internal and external persons who might file a complaint. This also includes people who are not directly affected but, for example, become aware of the violations.
Your company requires procedures for complaints management in accordance with § 8 (2) LkSG, which is to be designed in a target-group-oriented manner. In terms of content, it should include information on accessibility, types of complaints, the procedural process, potential dispute resolution, as well as responsible contacts and protection against retaliation.
The LkSG-compliant reporting channel is subject to the following requirements:
Accessibility: The reporting channel for whistleblowers must be easily accessible and multilingual, so that it can be used by people in their respective native languages.
Confidentiality The reporting channel must treat the identity of the reporter and the reported information confidentially – for example, through secure data transmission, anonymous reports, and the protection of personal data in accordance with the GDPR.
Independence The individuals within the company responsible for the complaints procedure must be independent and able to act impartially. Furthermore, they should be adequately trained.
Protection of the whistleblower: The company must ensure that whistleblowers are protected from potential retaliation.
6. Documentation and Reporting
Companies had to submit an annual report to the Federal Office for Economic Affairs and Export Control (BAFA) on the implementation of their due diligence obligations and publish it – no later than four months after the end of the respective financial year.
Update: Reporting obligation effectively suspended
The BAFA has completely ceased the examination of corporate reports pursuant to Sections 12 and 13 of the LkSG with a decree dated 1 October 2025; since then, the submission of reports via the BAFA portal is No longer possible. The government's draft amendment to the LkSG also provides for the reporting obligation to be deleted retroactively to 1 January 2023 without replacement. However, as of July 2026, the amendment act had not yet been promulgated. The substantive due diligence obligations – risk analysis, prevention and remediation measures, complaint procedures, and Documentation – remain unchanged.
These sanctions are threatened in the event of breaches of the Supply Chain Act.
The reporting channel established under the Supply Chain Due Diligence Act must protect the confidentiality of the reporting person’s identity and their personal data. If no complaints procedure is available or the procedure does not comply with the law, fines of up to €800,000 may be imposed. For companies with an average annual turnover exceeding €400 million, the fine may instead amount to up to 2% of worldwide annual turnover. A violation may also result in exclusion from public procurement procedures for up to three years.
Update: Sanctions practice significantly weakened
The BAFA will only impose fines as a last resort for particularly serious violations from 1 October 2025. The government draft for the amendment to the LkSG (Supply Chain Act) provides for the deletion of nine of the thirteen administrative offence provisions without replacement; in future, sanctions will only apply to „serious violations“ or massive human rights abuses. The previous reference to a fine of „up to 8 million Euros“ was based on a shortened representation – the limits of § 24 LkSG with up to 800,000 euros or 2 percent of turnover.
The EU Supply Chain Act (CSDDD) and the Omnibus package
The EU Supply Chain Directive Directive (EU) 2024/1760 (CSDDD) was adopted by the Council of the EU on 24 May 2024 and entered into force on 25 July 2024. It was originally intended to be transposed into national law by 26 July 2026 and to cover companies with more than 1,000 employees and €450 million in turnover. Background to the policy and its amendment.
With the simplification package „Omnibus I“ presented on 26 February 2025, the EU Commission has significantly relaxed the rules. The package consists of two legal acts: the „Stop-the-Clock“ Directive (EU) 2025/794, announced in 2025, and the substantive amending Directive (EU) 2026/470, which was published in the EU Official Journal on 26 February 2026 and entered into force on 18 March 2026. The changes through Omnibus I.
The most important changes to the CSDDD by Omnibus I:
Area of application severely restricted: Now only companies with more than 5,000 employees and more than EUR 1.5 billion in worldwide net sales, instead of the previous 1,000 employees and EUR 450 million. Overview from the IHK Düsseldorf.
Unified application start The staggered waves will be repealed; due diligence obligations will apply uniformly from 26 July 2029, and reporting from financial years commencing on or after 1 January 2030.
Lower penalty limit The minimum cap has been lowered from 5 per cent to 3 per cent of worldwide net turnover.
No more EU-wide harmonised civil liability: Art. 29 of the CSDDD now refers to national law; a mandatory EU collective redress mechanism is no longer prescribed.
Longer monitoring cycle Regular reviews of the measures will now take place every five years instead of annually, supplemented by an ad hoc obligation in cases of specific indications.
For Germany, this means: The Coalition Agreement of 9 April 2025 proposes replacing the national LkSG with an „Act on International Corporate Responsibility“ that implements the CSDDD with low bureaucracy. Until then, the LkSG will apply as a transitional regulation.
LkSG and CSDDD compared (as of July 2026)
| Criterion | German Supply Chain Act | EU Corporate Sustainability Due Diligence Directive via Omnibus Directive |
| Application threshold | over 1,000 employees | more than 5,000 employees and more than EUR 1.5 billion in revenue |
| Application off | effective 2023/2024 | 26 July 2029 |
| Maximum fine | up to EUR 800,000 or 2 percent of turnover | up to 3 percent of worldwide net sales |
| Reporting obligation | BAFA examination discontinued from 01.10.2025; deletion planned | from financial year 2030 |
| Civil liability | no personal liability | Reference to national law; no EU harmonisation |
Criticism of the German Supply Chain Due Diligence Act
While the Supply Chain Act had long been called for by a wide range of interest groups, there has also been a great deal of criticism of it. For example, business associations such as the Federation of German Industries (BDI) and the Association of German Chambers of Industry and Commerce (DIHK) criticise that the Supply Chain Act places an unreasonable burden on companies. On the other hand, environmental and aid organisations such as Greenpeace and Oxfam criticise that the scope of the act does not go far enough and that the intended sanctions are insufficient. This criticism has intensified further in the context of the 2025/2026 reform discussions: while businesses welcome reliefs, civil society organisations warn that human rights protection is being undermined.
These arguments for and against the supply chain law are frequently put forward in discussions:
| PRO | CONTRA |
| Protecting human rights The law is intended to ensure that companies respect human rights in their supply chains and improve working conditions. | Bureaucracy and costs: Companies must expend considerable resources to carry out the necessary audits and reporting. |
| Environmental protection The law aims to strengthen environmental standards in supply chains and reduce pollution. | Disadvantage of location Some companies could move to countries with less stringent regulations to avoid the requirements of the LkSG. |
| Voluntary commitments are not enough. | Voluntary commitments are sufficient. |
| Workforce protection: The law is intended to combat child labour and forced labour in supply chains and to strengthen workers' rights. | Boundaries of Corporate Responsibility: The law excessively shifts the responsibility for complex problems in supply chains onto companies. |
| Legal certainty The LkSG creates clear legal frameworks for companies to reduce potential liability risks. | It remains unclear when a company has sufficiently fulfilled its duty of care. |
For which industries is the Supply Chain Act particularly important?
The German Supply Chain Due Diligence Act (LkSG) is particularly relevant for industries with complex, global supply chains where the risk of human rights violations, environmental pollution, and other sustainability-related issues is high. Incidents from the textile industry are particularly well-known. In 2013, Rana Plaza, a factory complex in Bangladesh housing mainly textile workshops, collapsed. According to official figures, 1,135 people died and nearly 2,500 were injured. This led to worldwide protests and demands from many human rights organisations for textile companies to assume responsibility for global supply chains.
The following industries are typically particularly affected:
Textile and Clothing Industry highly complex supply chains across multiple countries with an increased risk of labour rights violations, forced labour, child labour and environmental pollution.
Electronics industry Manufacture in various countries, many raw materials from conflict regions (e.g. copper or tin); compliance with environmental standards and labour rights is challenging.
Food industry complex supply chains with agricultural products from various regions; risks of land grabbing, exploitation, and environmental problems.
Mining and Raw Materials Industry Extraction of raw materials often takes place in countries of the Global South, with a high risk of human rights violations and environmental damage.
Conclusion
Even if official enforcement – particularly the reporting obligation – is currently suspended and a reform is pending: the substantive due diligence obligations continue to apply unchanged, and with the EU CSDDD, a uniform European framework will be introduced in the medium term. We therefore continue to recommend that companies:
- Act proactively
- Set up and carry out risk analyses
- Introduce and maintain a complaints procedure
Our tip: When establishing or implementing a corresponding complaints procedure, ensure that the reporting channel meets both the requirements of the Supply Chain Act and the specifications for Whistleblower protection fulfilled. This requirement will continue to apply after the reform.
We have summarised the to-dos for you in our LkSG checklist.
You want to learn more about how to use LegalTegrity for injuries within the area of responsibility of your suppliers, then contact us. We look forward to seeing you!
(The male form used refers to all persons, regardless of gender.)
