LkSG Reform: The End of the Reporting Obligation

LkSG reform: the short answer

The Federal Government wants to abolish the reporting obligation under the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG) retroactively from the 2023 reporting period and to limit fines to serious breaches. The government bill (Bundestag printed paper 21/2474 of 29 October 2025) was debated at first reading on 16 January 2026 and referred to the Committee for Labour and Social Affairs. As of November 2026, the consolidated text of the LkSG published on gesetze-im-internet.de still contains the reporting duty in § 10(2) and the full catalogue of fines in § 24, so the LkSG reform has not yet taken effect in the statute book.

In practice, however, the Federal Office for Economic Affairs and Export Control (BAFA) stopped reviewing company reports in 2025 on the government's instruction, as its reporting page explains.

For the roughly 1,000-employee-plus companies covered by the LkSG, the key message is that due diligence obligations remain. Risk analysis, preventive and remedial measures and a complaints procedure are still mandatory, and failures in these areas will still be fined under the proposed LkSG reform. This article explains the current law, the content and status of the bill, BAFA's practice and what companies should keep doing.

The LkSG as it stands

The LkSG has applied since 1 January 2023 and, since 1 January 2024, covers companies with their head office, principal place of business, administrative seat or registered office in Germany, or a branch in Germany, that usually employ at least 1,000 employees in Germany (§ 1(1) LkSG). It requires them to exercise due diligence regarding human rights and certain environmental risks in their own business area and at direct suppliers, and in certain cases at indirect suppliers.

Under the current § 24 LkSG, fines range up to EUR 100,000, EUR 500,000 or EUR 800,000 depending on the breach, and companies with average annual turnover above EUR 400 million can be fined up to 2 per cent of worldwide turnover for the most serious failures (§ 24(3) LkSG). Companies fined at least EUR 175,000 (higher amounts apply where the fine is based on the multiplied amounts or on turnover) should be excluded from public contracts for up to three years until they have demonstrated self-cleaning (§ 22 LkSG).

What the LkSG reform bill provides

The bill, titled "Act amending the Supply Chain Due Diligence Act – relief for companies through user- and enforcement-friendly implementation", pursues an interim goal. According to its explanatory memorandum, the coalition intends to replace the LkSG entirely with an Act on international corporate responsibility transposing the EU Corporate Sustainability Due Diligence Directive (CSDDD). Until then, the LkSG reform is meant to reduce administrative burdens.

• Reporting abolished. § 10(2) to (4) LkSG and the related BAFA review provisions in §§ 12 and 13 LkSG are deleted. The deletion takes effect retroactively from 1 January 2023, so companies would not need to prepare outstanding reports for 2023 and 2024.
• Documentation retained. Internal documentation of due diligence under § 10(1) LkSG remains mandatory.
• Fines narrowed. The new § 24(1) LkSG lists only four offences: failure to take preventive measures regarding a human rights risk, failure to take remedial action regarding a human rights risk, failure to prepare or implement a remediation concept, and failure to ensure that a complaints procedure is in place. The maximum fine for these is EUR 800,000, with the turnover-based fine of up to 2 per cent for companies above EUR 400 million turnover retained for the most serious failures.
• Ultima ratio. The explanatory memorandum describes fines as a last resort that should be preceded by engagement with the authority.

The remaining parts of the bill, including the narrower fines, would enter into force on the day after promulgation. The government estimates annual savings for companies of around EUR 4.1 million in compliance costs.

BAFA's current practice

BAFA anticipated the LkSG reform. Following the Federal Cabinet's decision of 3 September 2025 on the amending bill, it announced on its website that it had completely stopped reviewing company reports under §§ 12 and 13 LkSG with immediate effect, on the instruction of the Federal Government, and that reports could no longer be submitted through the BAFA portal. BAFA's guidance at the time assumed that the amendment would enter into force in early 2026.

BAFA continues to supervise compliance with the substantive due diligence duties. It can act on complaints by affected persons and organisations, request information and documents, and carry out on-site inspections. Its published handouts on risk analysis, complaints procedures and the assessment of appropriateness and effectiveness remain the most useful guidance on what the authority expects.

Legal uncertainty in the transition

Until the LkSG reform is promulgated, the reporting duty technically remains in force, and the obligation to publish the report on the company's website within four months of the financial year end has not been formally lifted. The government's instruction to BAFA and the retroactive deletion proposed in the bill make enforcement of the reporting duty very unlikely in practice. Companies that have prepared reports may still publish them voluntarily, and many use them as part of their sustainability reporting.

Civil liability and reputational risk

The LkSG expressly does not create civil liability for breaches of its obligations, although liability under other legal bases remains unaffected (§ 3(3) LkSG). The reform does not change this. However, persons who claim that a paramount protected legal position has been violated can authorise a German trade union or non-governmental organisation to bring their claims in court on their behalf (§ 11 LkSG). This procedural standing is unaffected by the reform and gives organisations a route to test supply chain practices in German courts. Claims under general tort law, consumer protection law and unfair competition law, for example against misleading sustainability claims, remain possible regardless of the LkSG reform.

Reputational risk also persists. Non-governmental organisations continue to file complaints with BAFA and to publish reports on supply chain practices, and customers and investors increasingly ask for evidence of due diligence. Companies that reduce their efforts because the public report has disappeared may find it difficult to answer such enquiries, and may face difficulties under the CSDDD later.

Public procurement

The exclusion from public contracts under § 22 LkSG is linked to final fines under § 24 LkSG. Because the reform narrows the fine catalogue, the exclusion risk will in future arise only for the most serious failures. Contracting authorities may nevertheless ask bidders for information on supply chain due diligence as part of award criteria or execution conditions, so documentation remains commercially relevant.

Interaction with the CSDDD and CSRD

The LkSG reform is explicitly temporary. The CSDDD entered into force on 25 July 2024, and its transposition deadline was postponed to 26 July 2027 by the stop-the-clock Directive (EU) 2025/794, as noted in the government bill. The EU Omnibus I package has since revised the CSDDD's scope and content. Germany intends to replace the LkSG with a new act implementing the revised Directive. Companies therefore face at least three regimes in quick succession: the current LkSG, the slimmed-down LkSG after the reform, and the future CSDDD-based statute.

Sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD) also covers supply chain issues for companies within its scope. For these companies, the end of LkSG reporting reduces duplication but does not remove the need to report on due diligence processes under the European Sustainability Reporting Standards.

What companies should do now

1. Maintain the core system. Keep risk management, annual and ad hoc risk analyses, preventive and remedial measures and the complaints procedure running.
2. Document internally. Continue documenting due diligence under § 10(1) LkSG; documentation is the evidence base if BAFA investigates or a complaint is filed.
3. Prioritise human rights risks. The narrowed fine catalogue focuses on human rights risks, but environmental duties remain law.
4. Plan for the CSDDD. Align processes with the CSDDD's risk-based approach and its focus on adverse impacts, as revised by Omnibus I.
5. Review supplier contracts. Keep supplier codes, audit rights and remedial clauses, which will remain necessary under the CSDDD.
6. Monitor the legislative process. Check the Bundestag documentation system for the committee report and the Federal Law Gazette for promulgation.

Groups with several German subsidiaries should also check how employee numbers are counted. Employees in Germany of all group companies are attributed to the ultimate parent company under § 1(3) LkSG, including employees posted abroad, and temporary agency workers count if deployed for more than six months. A group that falls below the threshold in one year may come back within scope later, so keeping the system running avoids costly restarts and preserves the knowledge built up since 2023.

Illustration: a hypothetical German automotive supplier with 4,000 employees stopped preparing its 2024 LkSG report after BAFA's announcement. It continues its risk analysis of tier-one suppliers in high-risk countries, maintains its multilingual complaints channel and records remedial actions taken with a supplier after a complaint about excessive working hours. If BAFA investigates, these records will show that the company met the duties that remain finable after the LkSG reform.

How TRW & Co helps with the LkSG reform

We advise companies on supply chain due diligence under the LkSG and on the transition to the CSDDD. We review existing compliance systems in light of the LkSG reform, help prioritise risks, design and audit complaints procedures, draft supplier codes and contract clauses and represent companies in BAFA proceedings. We also map LkSG processes against CSDDD and CSRD requirements to avoid duplicate work. Our work connects with our supply chain due diligence and sustainability reporting practices. Read also CSDDD after Omnibus I and complaints procedures under the LkSG and CSDDD. To review your set-up, contact us.