From now on: Less bureaucracy in the supply chain law

The Federal Ministry for Economic Affairs and Energy and the Federal Ministry of Labour and Social Affairs have stipulated that the Federal Office for Economic Affairs and Export Control (BAFA) should apply the Supply Chain Due Diligence Act (LkSG) – or Supply Chain Act for short – more flexibly and in a manner more favorable to businesses. The coalition agreement had already stipulated a significant reduction in bureaucracy related to the LkSG . With the Cabinet decision of September 3, 2025, to revise the law, the Federal Government paved the way for this.

For businesses, this means that the current obligation to produce detailed reports will be completely abolished – retroactively! At the same time, nine of the thirteen possible grounds for fines will be removed from the law without replacement. This will eliminate time-consuming documentation for many companies and the risk of fines for minor formal errors.

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No more reports, ongoing proceedings are discontinued

To make the relief immediately noticeable , the Federal Ministry for Economic Affairs and Energy (BMWi) has instructed the Federal Office for Economic Affairs and Export Control (BAFA) to cease auditing company reports with immediate effect . Existing fine proceedings related to these issues will be discontinued, and no new ones will be initiated. Penalties will only remain possible in very serious cases, for example, involving gross human rights violations. Even then, BAFA must provide a strict justification for initiating proceedings.

Furthermore, the Federal Office for Economic Affairs and Export Control (BAFA) will intensify its communication with businesses. More practical assistance will be provided, such as implementation support and assistance with collaborations between different companies. The next step is to replace the existing Local Tax Code (LkSG) with the new EU Due Diligence Directive (CSDD) – but in such a way that the rules can be implemented with as little paperwork as possible. The Federal Government emphasizes that craft businesses and other small companies should be burdened as little as possible.

Background

The German Supply Chain Act has been in force since 2023. Since 2024, companies with at least 1.000 employees have been required to comply with the due diligence obligations stipulated in the Supply Chain Act. The Cabinet now intends to abolish the reporting requirements for compliance with these due diligence obligations. Simultaneously, on September 3, 2025, the Cabinet approved the draft legislation for the implementation of the EU Corporate Sustainability Reporting Directive (CSRD), which establishes the reporting requirements for the EU Due Diligence Directive (CSDDD). However, the legislative process at the EU level is not yet complete.

Detailed information about the LkSG for SMEs is available in the > Questions and Answers Catalog for SMEs of the BAFA.

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