On 5 July 2024, the German Federal Government announced amendments to the Supply Chain Due Diligence Act (LKSG) to bring it into line with the new EU Corporate Sustainability Due Diligence Directive (CSDDD).
Last Friday, 5 July 2024, was an eventful day for companies in Germany and Europe that deal with sustainability.
EU CSDDD
The EU Corporate Sustainability Due Diligence Directive (EU CSDDD) has been published in the Official Journal of the European Union and will enter into force after 20 days. This regulation is now the best regulatory benchmark for companies worldwide that want to establish or improve their human rights and environmental due diligence processes.
Especially for companies that also fall under the EU CSRD (Corporate Sustainability Reporting Directive) and therefore already have to report on their due diligence processes in the area of human rights and the environment, it makes sense to deal with the CSDDD now. The German government provided another reason for this last week.
LkSG
On Friday, the German Federal Government announced its planned amendments to the German Supply Chain Due Diligence Act (LkSG) in connection with the new EU CSDDD. It intends to implement the EU regulation 1:1 in this legislative period by amending the German LkSG.
Scope of application: The criteria for applicability are to be adapted to the EU CSDDD in the short term. In addition to the adjusted number of employees, a minimum turnover will also become relevant. This means that fewer companies than before will be directly covered by the LkSG, only around a third of the companies previously affected (< 1000). At the same time, the obligations arising from the EU CSDDD will have to be implemented at the latest date required by European law (from 2027 at the earliest).
Reporting obligation: From 2025, companies can replace their report under the LkSG with the report in accordance with the EU CSRD. Companies that fall under the CSRD would then not have to submit a separate report to the Federal Office of Economics and Export Control (BAFA). Until then, no sanctions will be imposed for breaches of reporting obligations under the LkSG.
EU CSRD
Following these current developments, the European CSRD reporting regulation has a key role to play in companies. It is now important to link the two together: human rights and environmental due diligence processes in accordance with the LkSG/CSDDD and the reporting requirements under the CSRD: synergies must be utilised and inconsistencies avoided in order to ensure effective and efficient implementation in companies.
We, the LRQA team, have been dealing with the interface between LkSG/CSDD and CSRD for some time now and know what to look out for when linking the two. For example, we can help you to understand the key differences and similarities or support you with specific issues, such as linking your risk analysis in accordance with the LkSG with the materiality analysis in accordance with the CSRD.
Would you like to find out more? We look forward to hearing from you!