What the LkSG phase out means for Big Brands and the Compliance Team
On September 3rd, 2025, the German Federal Government announced its decision to phase out the German Supply Chain Due Diligence Act (SCDDA) or Lieferkettensorgfaltspflichtengesetz (LkSG) in favor of the EU Corporate Sustainability Due Diligence Directive (CSDDD). This significant action harmonizes with the coalition to have CSDDD as its long-term framework for reducing human rights and environmental risks.
CSDDD still is under negotiation at the EU level due to the introduction of Omnibus. Therefore, companies are still obligated to SCDDA (LkSG) to ensure Human Rights standards are upheld until the CSDDD is fully transposed into national law and adopted. This decision by the German Government is also done with the intention to relieve companies of redundant reporting duties and strengthen the German economy.
What does this mean for brands?
Shift from National to EU-Level Compliance
As brands will no longer need to make extra efforts of reporting compliances that are specific to SCDDA (LkSG), start shifting supply chain compliance processes to meet the broader and more harmonized requirements of the CSDDD across the EU.
For compliance teams, this could look like reorienting from local adaptations of data and evidence collection and reporting frameworks (LkSG-specific reports) toward EU-wide due diligence structures.
Focus on Substantive Risk Management
Even under the interim SCDDA (LkSG) changes, obligations on due diligence, risk mitigation, and reparation remain. Brands operating in Germany must strengthen their processes to identify, assess, and address risks in supply chains, as these form the backbone of both the LkSG and CSDDD.
Traceability and Data: The Non-Negotiable Core Tools
Meeting CSDDD expectations will require more than policy statements. It will demand evidence that’s verifiable, traceable, and that can stand up to regulatory and stakeholder scrutiny.
Traceability platforms like TrusTrace are becoming the essential enablers of modern due diligence. They allow brands to:
- Identify risks beyond Tier 1– revealing where risks may be hidden deeper in the chain.
- Prioritize risk hot spots– identifying the suppliers, regions, or commodities with the highest likelihood of severe human rights or environmental offenses.
- Monitor and document progress– proving corrective measures are not just issued but implemented.
Without traceable, verifiable data on supply chains, brands will struggle to comply with the CSDDD once it replaces national law. See how TrusTrace ensures accountability at every tier with automation and traceability.
Prepare for Harmonization
Brands operating across multiple EU markets may no longer have to juggle fragmented compliance requirements for Germany, France, or the Netherlands. Instead, a single framework will guide their due diligence efforts.
But this harmonization also means that enforcement authorities across the EU will operate from the same rulebook. That could look like consistent enforcement and penalties for non-compliance. This makes it even more critical for brands to act early and position themselves as compliance leaders rather than laggards.
Why Acting Now Matters Under LkSG Changes
LkSG’s phase-out marks a turning point, bringing clarity and harmonization. This is the moment to optimize data reporting, eliminate redundancies, and strengthen risk management. Brands that are proactive and act now will be ready for future regulatory changes and maintain robust, EU-ready due diligence processes.
About TrusTrace
TrusTrace offers the market-leading risk, compliance and impact platform to standardize and streamline your due diligence processes. Ensure compliance with the CSDDD and other due diligence regulations with our proven platform. See the TrusTrace offering for CSDDD or speak with one of our experts.
Disclaimer:
This content is for informational purposes only and does not constitute legal advice. Please consult legal professionals for guidance specific to your situation.
