Germany’s new coalition government eliminates sustainability due diligence law

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

🗞️ Driving the news: Germany’s newly formed coalition government has announced the immediate repeal of the national Supply Chain Act (LkSG), which required large companies to perform annual human rights and environmental due diligence across their supply chains
• The CDU/CSU and SPD coalition will instead align with the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which is not expected to take effect until mid-2028 and contains less stringent obligations.

🔭 The context: Enacted in 2021, the LkSG was seen as a pioneering national law, mandating companies with over 1,000 employees to annually assess and mitigate sustainability risks across both direct and—under certain conditions—indirect suppliers
• The law was backed by sanctions of up to 2% of annual revenue
• However, in line with broader EU moves to reduce regulatory burdens under the Commission’s “Omnibus” proposals, Germany is now deferring to a less demanding and delayed EU framework

🌍 Why it matters for the planet: The repeal of the LkSG significantly weakens Germany’s oversight of corporate environmental and human rights impacts during a critical period for global supply chain reform
• The delay in enforcement until at least 2028, combined with diluted EU requirements, risks slowing progress on deforestation, pollution, and labor abuses across key industries
• Civil society groups warn that postponing national enforcement leaves a regulatory gap at a time when due diligence is urgently needed

⏭️ What's next: While Germany awaits implementation of the EU CSDDD, enforcement of corporate due diligence obligations will be paused—except in cases of serious human rights violations
• The Commission’s Omnibus proposals will limit due diligence to direct suppliers unless there is evidence of harm further down the chain, and reduce monitoring frequency to once every five years
• Companies must now prepare for a more fragmented and delayed compliance landscape

💬 One quote: “We support the Commission’s Omnibus to significantly reduce and postpone the extensive requirements regarding the content of EU sustainability reporting, particularly for small and medium-sized enterprises.” – German Coalition Agreement

📈 One stat: Under the LkSG, violations could trigger penalties of up to 2% of a company’s annual global revenue

See on illuminem's Data Hub™ the sustainability performance of Volkswagen and its peers Toyota and CIE Automotive

Click for more news covering the latest on corporate sustainability