Germany’s incoming coalition government has announced plans to repeal the German Supply Chain Due Diligence Act (LkSG). This decision, which was expected based on prior public statements, was included in the 144 page coalition agreement released yesterday, six weeks after the German federal elections.
The LkSG, which came into effect on January 1, 2023, requires larger German companies – including German subsidiaries and branches of U.S.-based and other foreign multinationals – to assess and address human rights and environmental impacts in their business and supply chains. From the start, the Act faced significant criticism, particularly from the business community.
As part of the coalition's Immediate Program for Bureaucracy Reduction, the government has decided to repeal the LkSG. The coalition agreement indicates that the LkSG’s reporting obligation will be immediately abolished, and that the current due diligence obligations will not be sanctioned until the EU-wide Corporate Sustainability Due Diligence Directive takes effect, except in cases of severe human rights violations. The coalition agreement is available in German here.
Starting in mid-2028, after the one-year delay contemplated by the Omnibus proposals, the CSDDD will begin to take effect, first for the largest companies. The repeal of the LkSG is therefore not the end of mandatory human rights and environmental due diligence in Germany, but rather a temporary respite.
The coalition agreement still requires formal approval from the governing bodies of the parties before it can be signed, but commentators expect this to occur before the end of April.
Rebecca Schulga, a Visiting Foreign Lawyer, contributed to the preparation of this post.
