Pressemeldungen - Unternehmensverantwortung & Lieferkettengesetz © joyful - depositphotos.com 05 September 2025 Mitigation instead of implementation: An overview of the state of play of the European Supply Chain Act On 3 September 2025, the Federal Cabinet decided to significantly weaken the German Supply Chain Act: The reporting obligation is suspended and sanctions are only provided for in the case of serious infringements. While this eliminates central instruments of national law, the Corporate Sustainability Due Diligence Directive (CSDDD) also threatens to be diluted at European level. Negotiations are ongoing in Brussels – time to take a look at the state of play. State of play of the European Supply Chain Act The transatlantic trade dispute between the US and the EU in the summer of 2025, as well as Chancellor Merz’s unilateral action against the German Supply Chain Act and the CSDDD – without the backing of his coalition partner SPD – have once again fuelled the debate on weakening European rules. Particularly explosive: In a joint statement with the US on 21 August 2025, Commission President Ursula von der Leyen already made concrete concessions to the US after weeks of the tariff dispute. There, von der Leyen reiterated that the CSDDD and related sustainability requirements should be amended in such a way that "no undue restrictions on transatlantic trade"[i] before there is any agreement within the EU on possible changes. Officially, it is said that this is only an ‘exchange of ideas’ between trading partners, but the intentions should have become clear. The European Supply Chain Act initially stipulated that not only European companies with 1,000 employees and a net turnover of 450 million euros (as of June 2024) would be recorded, but also companies from third countries if they achieve the same turnover in the EU, including the USA. Long before the tariff dispute, US politicians and business associations had therefore expressed criticism: too much bureaucratic effort, too high compliance costs, competitive disadvantages. Also in Germany and the EU, business associations, lobby groups and business-oriented parties such as the CDU / CSU criticize the planned directive as a bureaucratic monster and economic barrier for companies. It is therefore hardly surprising that half a year after the entry into force of the EU directive, the so-called omnibus initiative was already attempting to soften its requirements. On 23 June 2025, the EU Council adopted its ‘general approach’ on the Omnibus package. This concerns both the CSDDD and the CSRD (sustainability reporting) and establishes the joint negotiating position of the Member States vis-à-vis the Commission and Parliament. Surprisingly, the scope of the CSDDD was significantly restricted – although such a tightening was not originally part of the Omnibus proposal. For example, the rules will now only apply to companies with more than 5,000 employees and an annual turnover of 1.5 billion euros, instead of 1,000 employees and 450 million euros as originally planned. However, amendments to the Directive will only become final after the conclusion of trilogue negotiations, a vote in the European Parliament and publication in the Official Journal. Originally, implementation was foreseen by 26 July 2027 at the latest. The discussed ‘stop-the-clock’ rule could postpone the start of applicability to 26 July 2028. The wrong way to cut red tape The main argument in the debates about both the European and the German supply chain law is so often that it is too much excessive bureaucracy. Small and medium-sized enterprises (SMEs) in particular are burdened by high administrative burdens and reporting obligations. Studies of the IFW Kiel[ii] confirm that many SMEs feel overwhelmed by the new rules. However, a closer look shows: The main problem is not so much the bureaucracy itself as the ambiguity and uncertainty about the legal requirements. In a survey[iii] SMEs identified imprecise legal requirements, lack of knowledge on risk analysis and lack of country-specific information as the main hurdles. Handouts are often too general, suitable tools are hardly known. Large companies, on the other hand, simply pass on the uncertainty and workload by sending blanket questionnaires to all suppliers and thus increasing the effort. A real relief would be to centralise existing guides and tools and to provide low-threshold country-specific information on a central platform. However, the omnibus package does not provide for such a simplification. Instead, SMEs are indirectly burdened more: As suppliers to large companies that fall within the scope of the law, they must provide extensive information. As a result, the policy costs for SMEs are often twice as high as for large corporations, according to the study, because they shift their obligations downwards. Bureaucratic Deep Tier 1 approach A central element of the omnibus plans is the restriction of the scope of application to direct suppliers (Tier 1), based on the German LkSG. This is considered a “red tape”, but mainly relieves large companies, while SMEs remain burdened. The original risk-based approach of the European LkSG (CSDDD) required companies to take a closer look at where the greatest threats to human rights and the environment exist, whether from direct suppliers or further down the value chain. This principle complies with international standards such as the UN Guiding Principles on Business and Human Rights. For example, if a German fashion group buys finished collections from a medium-sized company in Italy, which in turn processes fabrics from Pakistani dyeries that source cotton from Uzbekistan, the company would have to tackle the biggest risks – such as forced labour in cotton cultivation or environmental and health risks in the dyeries. Suitable measures would be, for example, cooperation with local trade unions and NGOs, training for suppliers or the establishment of independent complaint mechanisms. The Tier 1 approach, on the other hand, requires only an audit of the Italian supplier. For large corporations, this means less depth in their auditing obligations. However, for SMEs acting as direct suppliers, it often means additional bureaucracy, as they have to bear the burden of proof. In the end, the CSDDD threatens to degenerate into a pure compliance exercise: Formally fulfilled obligations with no real impact on human rights or the environment. Impact of supply chain laws Studies show that mandatory due diligence not only improves the protection of human rights and the environment, but also strengthens the economic viability of companies. In Germany and France, companies have already been sued for failing to comply with national laws such as the Supply Chain Due Diligence Act or the French loi de vigilance standards. Many companies have also voluntarily introduced due diligence obligations – one third of companies are already implementing human rights due diligence, some along the entire value chain. They could benefit from binding requirements, as a level playing field is created. Costs for businesses are expected to remain low: Wages in the Global South account for only a fraction of the final price. At the same time, the law strengthens the position of workers, facilitates trade union formation and could serve as a catalyst for regional harmonisation. A study of the Vienna Chamber of Labour[iv] Expects overall positive net effects on the market: Compliant production increases, unfair competitive advantages are eliminated, exporting countries in the Global South hardly lose their competitiveness. State of play of the German Supply Chain Act The applicability of the European Directive is expected to be postponed until July 2028 – and thus also its transposition into national law. Until then, the German Supply Chain Act applies, but – as the Federal Cabinet decided on 3 September – it has now been significantly weakened. By eliminating reporting obligations and limiting liability for companies, key tools to effectively address human rights violations and environmental degradation are lacking until the implementation of the CSDDD. Contrary to what Chancellor Merz announced in May 2025, it will not be completely abolished for the time being. International Conference on Due Diligence and Labour Law On 7 October 2025, FEMNET e.V., in cooperation with the Rosa Luxemburg Foundation and the CorA network, is organising the conference "Due Diligence and Labour Rights – Implementation, Expectations and Prospects along the Supply Chain" in Berlin. The event is aimed at political decision-makers, trade union representatives and civil society actors from Germany, Europe and the Global South. The focus is on the practical implementation of the German Supply Chain Act (LkSG) and the EU Directive on Due Diligence for Sustainable Corporate Governance (CSDDD). sources [i] European Commission (2025): Joint statement by the United States and the European Union on the framework agreement for reciprocal, fair and balanced trade. Brussels, 21 August 2025. Retrieved 4 September 2025 [ii]Hanley, A.; Semrau, F.O.; Steglich, F.; Thiele, R. (2023): The cumulative effect of due diligence EU legislation on SMEs. Kiel Institute for the World Economy. Kiel. [iii][iii] Ebda. [iv] Jäger, Johannes; Durán, Gonzalo; Schmidt, Lukas (2023): Expected Economic Effects of the EU Corporate Sustainability Due Diligence Directive (CSDDD). (PDF) Published by the Vienna Chamber of Labour. Vienna.
