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German companies in limbo after government retreat on supply chain law

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By illuminem briefings

· 3 min read


illuminem summarises for you the essential news of the day. Read the full piece on Sustainable Views or enjoy below:

🗞️ Driving the news: The German government has halted the expansion of its Supply Chain Due Diligence Act, leaving companies uncertain about their obligations
The law, which took effect in 2023, mandates large firms to assess and address human rights and environmental risks in their supply chains
A planned extension to smaller companies and deeper supply chain tiers has now been postponed amid political resistance and lobbying pressure

🔭 The context: Germany's Supply Chain Act was initially praised as a milestone in European sustainability regulation, requiring due diligence not only within companies’ own operations but also among direct suppliers
However, opposition from pro-business factions and shifting political priorities have led the ruling coalition to delay the law’s broadening
The move coincides with the European Union’s ongoing deliberations over the Corporate Sustainability Due Diligence Directive (CSDDD), which may soon supersede national frameworks

🌍 Why it matters for the planet: The pause undermines momentum for stronger corporate accountability on human rights and environmental harm across global value chains
Companies that scale back compliance risk misalignment with upcoming EU regulations and international expectations
At the same time, those that maintain robust due diligence may gain reputational and operational resilience as investor scrutiny and legal exposure increase globally

⏭️ What's next: German firms now face a strategic choice: reduce compliance efforts in line with the government’s retreat or continue investing to align with the forthcoming EU-wide due diligence law
Legal uncertainty is expected to persist until the final CSDDD is adopted, likely in 2025
This may lead to a fragmented landscape of corporate practice unless harmonised regulation is enforced across the bloc

💬 One quote: “Rolling back the law sends the wrong signal to businesses and victims of human rights abuses,” — Lena Swedlow of the Germanwatch NGO.

📈 One stat: 3,000+ — the number of companies originally expected to fall under the expanded scope of Germany’s Supply Chain Act before the delay

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