Germany: Incoming government plans to scrap supply chain law

New German coalition government plans to abolish national supply chain law, favouring simplified EU regulations while suspending enforcement except for severe human rights violations, an analysis by our friends at Kliemt.HR Lawyers

The key points: The incoming German coalition government plans to abolish the national supply chain law and support the EU Omnibus regulation, which reduces due diligence requirements set out in the CSRD and CSDDD.

Why this matters: This change could significantly impact how companies manage their supply chains and report on corporate social responsibility. It may reduce bureaucratic burdens for businesses but could also affect human rights and environmental protections.

What might happen next: The new government is expected to introduce a bill to suspend the current national supply chain law and implement a new law on international corporate responsibility that aligns with the European Supply Chain Directive (CSDD) in a less bureaucratic manner.

European Comment:  It is s unclear what will happen to existing complaints made under the supply chain act (e.g. the complaint by United Auto Workers against Mercedes over alleged anti-union behaviour at its plant in Alabama). The complaint was made under the law as it stood, and changing the law retrospectively is unlikely to happen. We will wait to see what happens.

The article in full:

Dr. Burkard Göpfert, LL.M. (Partner), & Miriam Siemen (Senior Associate) at Kliemt.HR Lawyers write: According to the coalition agreement negotiated between the CDU, CSU, and SPD, and published on 10 April, the incoming German government plans to "abolish" the national supply chain law (Lieferkettensorgfaltspflichtengesetz). 

Instead, the future coalition partners will support the EU Omnibus regulation which significantly reduces and postpones the extensive due diligence requirements set out in the CSRD and CSDDD. The Omnibus will take around 80% of undertakings currently covered by the CSRD out of scope. The CSRD and CSDDD will replace the current supply chain law.

The coalition agreement has not yet been signed. The new German government is expected to be formed on 7 May according to recent reports. It is expected that the ministry responsible will then introduce a bill to suspend the current national supply chain law. Germany must then again implement the European Supply Chain Directive (CSDD). 

According to the coalition agreement, the national supply chain law will be replaced by a law on international corporate responsibility that implements the European Supply Chain Directive (CSDD) in a way that is both "low on bureaucracy" and "easy to enforce". The incoming new government intends to immediately abolish reporting requirements under the current national supply chain law. Breaches of legal duties under the current law will not be sanctioned until the new law comes into force, except for massive human rights violations. 

It is expected that the new government will seek to make significant changes to a whole range of regulations that create economic obstacles and regulations at the level of the EU Commission, affecting not only GDPR and AI, but also supply chain regulation and perhaps even the equal pay obligations that are not due to come into force until 2026, but will hinder economic growth in Germany in the next months.

What happens to existing complaints that have been made under the supply chain act, such as the complaint by the United Auto Workers against Mercedes over alleged anti-union behaviour at its plant in Alabama, is unclear. The complaint was made under the law as it stood, and changing the law retrospectively is unlikely to happen. We will wait to see what happens.