EUDR / LkSG / CSDDD – Overview and current developments

The regulation of due diligence obligations along global supply chains and the associated requirements for companies have developed continuously in recent years. Three central legal acts are in particular focus: the EU Deforestation Regulation (EUDR), the German Supply Chain Due Diligence Act (LkSG) and the Corporate Sustainability Due Diligence Directive (CSDDD). Considerable efforts are required of the affected companies in order to be able to comply with the requirements. At the same time, open questions about the status quo and future developments as well as the ongoing political discussions are leading to uncertainty and a lack of planning security among the companies concerned.

EU Deforestation Regulation (EUDR)

The EUDR (Regulation (EU) 2023/1115) is intended to help protect forests worldwide from deforestation and degradation. This objective is to be promoted by regulating the placing on the EU market of certain commodities and the products derived from these commodities. The relevant raw materials include cattle, cocoa, coffee, oil palms, rubber, soy and wood. In addition, products manufactured using these raw materials are relevant insofar as they are listed in Annex I of the Regulation. These products include, for example, chocolate, pneumatic tires made of rubber, chipboard and paper.

The relevant raw materials and products may only be placed or made available on the EU market or exported if they are free of deforestation. This means that the raw materials must not have been produced on land that was deforested after 31.12.2020. They must also have been produced in compliance with the relevant legislation of the country of origin. In addition, a due diligence declaration must be available for the raw materials and products, which can be used to document the fulfilment of the above-mentioned requirements. Operators and also traders of such products must ensure and be able to prove that their products comply with the requirements of the EUDR. In particular, the operators, as the person who places or exports relevant products on the EU market, is subject to comprehensive due diligence obligations in this regard. This includes collecting detailed information on the origin and suppliers of the products, including geolocation of the land on which the raw materials were produced, carrying out risk analyses based on this, taking risk prevention measures and reporting annually.

Postponement of the start of application

Actually, the regulations of the EUDR were supposed to apply on 30.12.2024 for large and medium-sized enterprises and then also on 30.06.2025 for small and micro enterprises. Due to existing uncertainties regarding the implementation of the EUDR and considerable concerns from individual EU member states, business associations and also third countries, the start of application of the regulation has now been postponed by one year to 30.12.2025 and 30.06.2026 respectively.

No changes to the regulatory content

Substantive changes to the regulation, as initially demanded by the European Parliament, have not been able to prevail. In particular, the introduction of a “no-risk” category in the country benchmarking was ultimately abandoned. However, by 30.06.2025 at the latest, the benchmarking of the countries of origin by the EU Commission with the classification of the countries regarding a normal, low and high risk of deforestation should be available.

Update FAQ, Guidelines and EUDR Information System

In order to support companies in preparing their measures to implement the regulation and to clarify application issues, the EU Commission updated its FAQ on the EUDR in October 2024 and also provided guidance with further information.

Since December last year, the EUDR Information System is accessible, through which the due diligence declarations can be submitted digitally. Further training documents and training videos are also offered there.

Conclusion

The affected companies should take advantage of the postponement of the start of the application and continue the implementation measures they have already initiated or start with them now at the latest.

Experience has shown that a longer preparation period is necessary in order to integrate and implement appropriate organizational measures and processes in the risk management system. In particular, the implementation of effective measures for the traceability of supply chains and the verification of compliance with the relevant legislation in the country of origin requires considerable effort.

Supply Chain Due Diligence Act (LkSG)

Since January 2023, the LkSG has already applied to companies based in Germany with more than 3,000 employees and, since January 2024, also to companies with more than 1,000 employees. The law obliges companies to comply with due diligence obligations with regard to the observance of human rights in their supply chains and to integrate corresponding strategies and measures into their risk management systems. This includes conducting risk analyses, implementing preventive measures, taking corrective action in the event of identified non-compliance, establishing a complaints procedure, and reporting annually on the due diligence measures taken.

Political discussion about a repeal

Even after the implementation of the LkSG, there are still political discussions about repealing the law. Leading politicians have publicly spoken out in favor of its abolition. However, corresponding bills in the Bundestag have always been rejected so far. It therefore remains to bee seen how things will develop after the upcoming Bundestag elections under a new federal government.

Postponement of the reporting date

Due to the political discussions and also the developments on the implementation of the EU legal requirements for corporate sustainability reporting, BAFA has postponed the deadline regarding the availability and publication of reports under the LkSG by one year. For the first time on 01.01.2026, BAFA will check compliance with the reporting obligation and its submission to BAFA. If the submission of a report to BAFA and its publication under the LkSG was already due before this date, BAFA will not sanction the failure to meet the deadline, provided that the report is submitted to BAFA by 31.12.2025 at the latest.

Conclusion

The further development and political discourse on the LkSG after the Bundestag election should be observed by the companies. Despite the political discussions about the repeal of the LkSG and the postponement of the deadline, however, it should be pointed out that the LkSG is a valid law and the due diligence obligations under the LkSG must be fulfilled by the companies concerned. Violations of the LkSG can be punished. BAFA’s accountability report for 2023 makes it clear that BAFA conscientiously performs its task as the supreme control and enforcement authority.

Corporate Sustainability Due Diligence Directive (CSDDD)

The CSDDD (Directive (EU) 2024/1760), which came into force in July 2024, is aimed at the EU member states to implement the framework requirements and goals contained therein with regard to the improvement of human rights and environmental standards in the supply chains of companies throughout the EU into the national law of the EU member states by means of corresponding laws by 26.07.2026. So far, it is planned that starting on 26.07.2027, the provisions, staggered in three stages over 2 years, will apply to companies based in the EU. The staggered start of application is based on the number of employees and the worldwide annual net turnover.

However, the regulations will also be applied in three stages for third-country companies that exceed certain annual net turnover thresholds in the EU, also staggered in time.

Need for adaptation of the LkSG

In Germany, the LkSG will have to be adapted in accordance with the directive. The provisions of the CSDDD are largely similar to the provisions in the LkSG, but there are also differences. As embedded in the LkSG, the Corporate Sustainability Due Diligence Directive requires due diligence obligations to be fulfilled and strategies and appropriate measures to be included in risk management systems. Existing risks in the supply chain must be identified and assessed and preventive and corrective measures must be taken, a complaint management system must be set up and there is an annual reporting obligation.

Compared to the LkSG, however, the Corporate Sustainability Due Diligence Directive places a stronger focus on environmental due diligence, which obliges companies to identify and minimise not only human rights but also environmental risks in their supply chains. Among other things, companies have to draw up a plan to mitigate the consequences of climate change in the context of their business.

In contrast to the LkSG in its actual version, the Corporate Sustainability Due Diligence Directive provides for civil liability in the event of violations of the duty to prevent or remedy negative effects, which means that companies can also be confronted with claims for damages from injured persons.

Another significant difference to the LkSG is the scope of application of the CSDDD. This is significantly more limited than the LkSG due to the high turnover thresholds. However, it is more than questionable whether the amendment of the LkSG will lead to a corresponding restriction of the current scope of application. This is because the prohibition of deterioration embedded in the CSDDD means the level of protection provided by existing national laws may not be lowered in principle.

Simplification and reduction of bureaucracy

The EU Commission has announced that it will publish its proposal for the so-called “Omnibus Regulation” on 26.02.2025. However, this is not expected to happen until March. In addition to proposals to simplify and reduce bureaucracy in the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy Regulation, the focus will also be on the Corporate Sustainability Due Diligence Directive (CSDDD). It is unlikely that the EU Commission can be expected to abandon the fundamental regulatory content of the legal acts, but far-reaching simplifications should be made. Consideration will be given to simplifications that reduce the redundant reporting requirements from the aforementioned legal acts. The postponement of the start of application, at least with regard to reporting obligations, the limitation of the scope of application and a significant reduction in the number of data points to be reported are also at the centre of the discussions. Targeted measures are also planned to stop the “trickle-down” effect of reporting obligations on smaller companies in the supply chain, so that they are not indirectly burdened in connection with the reporting obligations of larger companies.

Conclusion

It remains to be seen whether the announced far-reaching simplifications will ultimately lead to a substantial reduction in bureaucracy. On 29.01.2025, the EU Commission published the “Competitiveness Compass for the EU”, which also contains references to simplification efforts with regard to the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy Regulation and the Corporate Sustainability Due Diligence Directive. The pressure from business and politics to ensure that the reforms lead to comprehensive relief and, in particular, to create planning security is at least high.