The German Supply Chain Act is changing what you need to know
Tomas Novotny
Solutions Expert
16 Mar 2026
About 8 mins
The German Supply Chain Due Diligence Act (LkSG) marked a major shift in corporate responsibility, setting clear expectations for how companies manage human rights and environmental risks in their supply chains.
Now, the European Union is introducing its own, broader legislation: the Corporate Sustainability Due Diligence Directive (CSDDD), which will require EU Member States, including Germany, to adapt and extend national laws like the LkSG within a harmonised EU framework.
This transition will require businesses to adjust their compliance strategies over the coming years as the directive is transposed into national law and phased in for different company sizes. Understanding what will change is key to managing supply chain risk effectively and maintaining a strong competitive position.
From LkSG to CSDDD: an overview of the changes
The LkSG came into effect on 1 January 2023. It initially applied to companies in Germany with at least 3,000 employees and, since 1 January 2024, has applied to companies with at least 1,000 employees in Germany. The law requires in-scope companies to conduct human rights and environmental due diligence across their own operations and direct suppliers, and to address risks at indirect suppliers when they have substantiated knowledge of potential violations.
The CSDDD builds on this foundation but expands the requirements significantly. It aims to create a harmonised legal framework for corporate sustainability due diligence across the EU, so that similar rules apply to large companies regardless of where they are headquartered. For companies already working to comply with the LkSG, this EU framework provides both a clearer long-term direction and a signal that expectations on due diligence will continue to increase.
While the core principles of risk identification, prevention, mitigation, and remediation remain, the CSDDD generally introduces stricter obligations for in-scope companies. It has a broader value chain focus and provides for more severe consequences in cases of non-compliance, including harmonised civil liability and potentially significant turnover-based fines. Companies that are already compliant with the LkSG have a strong starting point, but they will still need to enhance and widen aspects of their processes to meet CSDDD expectations.
Key differences between LkSG and CSDDD
Understanding the main distinctions between the two laws is crucial for preparation. While the details will depend on the final text and national implementation, several themes are already clear.
A wider scope
The CSDDD will apply to large EU companies that meet combined employee and turnover thresholds, as well as large non-EU companies that generate substantial turnover within the EU’s internal market. This means that some multinational groups not directly caught by the LkSG today could still fall within the CSDDD’s scope because of their EU-wide footprint.
In addition, the directive extends due diligence requirements along the company’s “chain of activities”, covering upstream and certain downstream business partners. In practice, this means moving beyond a primary focus on direct suppliers and own operations to a more structured, risk-based approach across deeper supply tiers and relevant downstream relationships, while still prioritising the most severe and likely impacts.
Stronger enforcement
One of the most significant changes is the introduction of a harmonised civil liability regime. Under the CSDDD, EU Member States must establish rules under which companies can be held liable if they intentionally or negligently fail tocomply with certain due diligence obligations and this failure leads to harm. This will strengthen the ability of affected individuals and communities to seek compensation and is likely to increase litigation and stakeholder scrutiny.
In parallel, national supervisory authorities will have enhanced powers to monitor compliance and impose administrative sanctions. These can include fines calculated as a percentage of a company’s worldwide net turnover, which creates a much stronger financial incentive to implement robust due diligence systems and documentation.
Broader due diligence obligations
The CSDDD requires a more comprehensive and forward-looking approach to due diligence. In addition to human rights and many environmental risks already covered under the LkSG, the directive places stronger emphasis on climate and broader sustainability-related impacts. In-scope companies will need to ensure that their business models and strategies are aligned with EU climate objectives and the goals of the Paris Agreement, often through a transition planning process that is closely connected to climate-related reporting obligations under the Corporate Sustainability Reporting Directive (CSRD).
More generally, companies will be expected to integrate due diligence into corporate governance and risk management, engage meaningfully with stakeholders, and demonstrate how they prioritise and address the most severe risks across their chain of activities. For LkSG-compliant organisations, this usually means expanding existing processes rather than starting from scratch.
How to prepare your business for the CSDDD
Although detailed national implementation is still to come, there are concrete steps you can take now to future-proof your due diligence programme.
•Review your current LkSG compliance framework and identify where it will need to evolve to meet the CSDDD’s broader, EU-wide requirements, especially around value chain coverage, governance, and documentation.
•Expand your risk analysis to cover indirect suppliers and relevant downstream business partners in a structured, risk-based way, so that your processes can eventually apply across the full chain of activities.
•Strengthen supplier engagement by clearly communicating expectations and using structured tools, such as the Sedex platform and Self-Assessment Questionnaire (SAQ), to collect comparable data, monitor performance, and support improvements over time.
•Update company policies and procedures so they reflect emerging CSDDD concepts, including integration of climate and environmental objectives, escalation pathways, and strong preventative and corrective action processes.
•Use SMETA audits and similar site assessments where appropriate to investigate higher-risk sites in more depth, validate supplier information, and support targeted remediation and capacity building.
•Enhance reporting and transparency by centralising supply chain data, mapping your most salient risks, and aligning your disclosures with both national expectations under the LkSG and upcoming CSRD reporting requirements.
To explore these steps in more detail, you can read our complete CSDDD compliance guide and download our CSDDD compliance checklist, which translate legal concepts into practical tasks for procurement, sustainability, and compliance teams.
LkSG vs CSDDD at a glance (post‑Omnibus)
| Aspect | LkSG (Germany) | CSDDD (EU, post‑Omnibus I) |
| Legal nature | National law applicable in Germany. | EU directive to be transposed into national laws across Member States. |
| In-scope companies | Companies with at least 3,000 employees in Germany from 2023, extended to at least 1,000 employees from 2024. | Large EU and nonEU companies that meet high combined employee and turnover thresholds, including nonEUcompanies with significant EU turnover; thresholds were raised and scope narrowed by Omnibus I. |
| Value chain coverage | Own operations and direct suppliers; indirect suppliers covered when there is “substantiated knowledge” of possible violations at indirect suppliers. | “Chain of activities” covering operations, subsidiaries, and upstream plus certain downstream business partners, with a riskbasedapproach to prioritising value chain impacts. |
| Risk focus | Human rights and selected environmentrelatedrisks defined in the Act and referenced conventions. | Human rights alongside a broader set of environmental and sustainability risks, aligned with EUlevel objectives and linked to other instruments such as the CSRD. |
| Climate / transition plans | No standalone climatetransitionplanobligation, though environmentrelatedrisks must be addressed where relevant. | The specific obligation to adopt and put into effect a climate transition plan has been removed; climate expectations for many inscopecompanies are now primarily addressed via CSRD/ESRS reporting rather than CSDDD itself. |
| Civil liability | No dedicated EU-style civil liability regime created by the LkSGitself; enforcement is mainly viaadministrative measures, with any civil liability arising under general German law. | The previously proposed harmonisedEU civil liability regime has been deleted; civil liability for breaches of due diligence duties will now depend on each Member State’s national law rather than CSDDD harmonisation. |
| Administrative sanctions | Fines up to 8m EUR or, for companies with turnover above 400m EUR, up to 2% of annual global turnover, plus potential exclusion from public tenders for serious violations. | Turnoverbased fines set by Member States, capped at a maximum of 3% of the company’s net worldwide turnover, alongside other supervisory measures; the cap was lowered and harmonisedby Omnibus I. |
The future of supply chain due diligence
The evolution from a purely national framework like the LkSG to an EU-level directive such as the CSDDD represents the next step in supply chain accountability. While it introduces new challenges, including broader value chain expectations, potential civil liability and stricter oversight, it also provides a clearer benchmark for what “good” due diligence looks like across Europe.
By taking proactive steps now, you can build on your LkSG experience, ensure readiness for CSDDD transposition, and strengthen your competitive advantage. Using the right tools, integrating due diligence into core business decisions, and fostering strong, long-term supplier partnerships will be essential to navigating this evolving legal landscape successfully.
Want to learn more?
If you’d like to speak about how Sedex can help you comply with EU supply chain legislation.
And if you speak German, you can watch our recent webinar featuring Niklas Gatermann and Sedex experts. The session covers the key requirements of the LkSG, the CSRD, and the upcoming CSDDD, and explores how the SMETA audit methodology and the Sedex platform can help your organisation achieve robust due diligence and transparency, strengthen ESG performance, and support compliance with evolving European legislation.
