All companies these days, whether SMEs or large corporations, find themselves caught in a whirlwind of constantly evolving sustainability regulations. Many are understandably confused and frustrated by shifting laws, uncertain deadlines and changing obligations. To make matters worse, misinformation is spreading rapidly, especially on social media platforms like LinkedIn. But claims that suggest “due diligence requirements no longer exist” or that “the EU has significantly watered down regulations” are plainly incorrect or misleading at best.
This blog provides an analysis of the phase-out of Germany’s Supply Chain Act (LkSG) and how it ties in with EU’s directives, such as CSRD and CSDDD, and showcases the strategic significance of resilience amid regulatory uncertainty.
The Reality Check: Current Status of Germany’s LkSG
1. The LkSG remains effective – but with limitations
Contrary to widespread rumors, Germany’s LkSG has not been completely revoked. While a political agreement proposing its replacement is currently pending, the legislation’s core obligations still apply. In a nutshell, this is what companies need to know:
- Reporting obligations have been temporarily suspended,
- Core requirements such as risk analysis, prevention and remediation remain mandatory,
- Serious human rights violations continue to be clearly regulated and subject to sanctions.
In addition, given Germany’s commitment to international frameworks, such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines, one could argue whether by revoking the LkSG without introducing an alternative legislation Germany would remain compliant with international law.
2. The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is approaching
The Corporate Sustainability Due Diligence Directive (CSDDD) has been adopted and will be transposed into German national law in the coming years.
While ongoing revisions, known as the Omnibus process, may slightly reduce its scope, it will still expand due diligence obligations across the entire value chain. This means that companies that scale back now will likely need to double their investment in the future to ensure compliance.
Implications for Compliance and Strategic Resilience
In this rapidly changing regulatory landscape, clear, factual guidance is more important than ever. Decision makers can only navigate misinformation proactively if they have a thorough understanding of the legal environment – and thus will gain strategic advantage.
Developing systems that support ESG regulatory demands isn’t just about ticking compliance boxes – it's about building long-term resilience. Regulations such as the LkSG and CSDDD aim to help companies to proactively:
- Identify risks early,
- Prevent harm,
- Avoid liability,
- Safeguard reputation.
From LkSG to EU Directives: A Regulatory Rollercoaster
Initially, Germany’s LkSG represented a pioneering step toward legally mandated ESG risk management. It emphasized proactive risk identification and mitigation but also prompted many companies to adopt rushed, compliance-driven strategies focused more on ticking boxes than on long-term strategic integration.
Subsequent regulatory developments, like the CSRD and CSDDD, further intensified confusion and urgency. Now, in 2025, businesses face additional waves of uncertainty with delays, reversals, and political negotiations.
Meanwhile, global conditions are the most volatile conditions they’ve been for decades:
- Trade conflicts,
- Risk of recession,
- Wars and geopolitical instability,
- Climate disasters and supply chain disruptions.
So today businesses must address deeper strategic questions that go far beyond compliance:
How do we build a resilient business model capable of withstanding regulatory, economic and environmental shocks?
And with that, it’s worth remembering that while regulations may shift, risks will remain. So strategic risk management, resilience and future readiness become key differentiators.
Resilience in Practice: Strategic Recommendations for Businesses
The political decision to phase out the LkSG may look like a step back. But businesses shouldn’t interpret this as a green light to stop what they’ve been doing so far. Instead – while the LkSG remains active – they can leverage this transition period to strengthen their systems, analyze supply chain risks, and deepen ESG integration will secure lasting competitive advantages.
Key Recommendations:
- Keep your LkSG risk management structures – they’ll form the foundation for complying with the CSDDD.
- Use this transition period to optimize processes and embed supply chain topics into your compliance and ESG strategies.
- Prepare for the EU regulatory framework: supplier management, contract clauses, risk mapping, and climate plans should be on your roadmap.
See how to manage supply chain risks with ease and confidence.
Less Panic, More Clarity
The idea that “everything has been reversed” is a dangerous misconception. Political negotiations may create temporary ambiguity, but the long-term trajectory in Germany, the EU, and globally clearly points towards increased due diligence, transparency, and climate accountability.
Businesses investing in the right skills, processes and systems will gain:
- Agility to adapt to any regulatory uncertainty,
- Supply chain resilience,
- Stakeholder trust,
- Competitive edge through innovation,
- Most importantly, operational confidence amidst global volatility.
Sustainability: A Core Strategic Advantage
Sustainability is becoming a key strategic differentiator. Companies that are actively managing ESG risks are not only better positioned in terms of compliance but also reputationally: they are seen as reliable, future-oriented partners for customers, investors and public stakeholders.
But to achieve that they need technology that goes beyond a one-time regulatory project. Effective ESG management demands adaptable, scalable, and integrative solutions that seamlessly integrate into existing processes – and businesses should embrace it as an ongoing strategic commitment. Those that prioritize foresight today will lay the foundations for sustainable success and long-term resilience.
See how we can help you manage ESG risks and build resilient supply chains.
About the Author
Follow on Twitter Follow on Linkedin Visit Website More Content by EcoVadis EN
