Current Political & Legal Developments

Frameworks such as the UN Guiding Principles on Business and Human Rights emphasise all companies’ responsibility to implement human rights due diligence processes, regardless of their size, sector, location, ownership or structure. However, certain companies are particularly in scope of current legislative processes.

The German Supply Chain Due Diligence Act

The due diligence obligations of the Supply Chain Due Diligence Act (in German Lieferkettensorgfaltspflichtengesetz, LkSG) have been in force in Germany since January 1, 2023. The aim of the law is to create legal clarity for companies as they implement human rights due diligence processes and to strengthen the rights of potentially affected parties.

What is the law about? And which companies are affected? In brief: The national law imposes due diligence obligations on companies with at least 1,000 employees in Germany. Temporary workers and employees posted abroad will also be taken into account.

This development raises questions for companies. The Helpdesk on Business and Human Rights is pleased to support you in implementing human rights due diligence processes with your company.

European Developments

EU Corporate Sustainability Due Diligence Directive (CSDDD)
The EU Corporate Sustainability Due Diligence Directive (CSDDD) came into force in the European Union on July 25, 2024. For the first time, the Directive creates a uniform and binding regulation across all EU Member States that obliges EU and non-EU companies operating in the EU to anchor human rights and environmental due diligence obligations in the so-called chain of activities. As a Directive, it has to be transposed into the national law of the Member States. The CSDDD provides for an transposition period until July 26, 2026. 

The EU is currently working on simplifying several Directives and Regulations relating to sustainability in the so-called Omnibus procedure. Several omnibuses are proposing changes to the CSDDD, the CSRD, the Taxonomy Regulation, the CBAM (Omnibus I), and the Battery Regulation (Omnibus IV).

Unlike the German Supply Chain Due Diligence Act (LkSG), employee numbers are calculated based on full-time equivalents. Temporary work and other atypical forms of employment are included if they meet the European Court of Justice's criteria for being classified as workers. Further information on the CSDDD can be found in our blog post  (available in German only).

In addition to the CSDDD, there are other developments at the European level, as well as existing regulations and directives related to corporate due diligence and sustainability.

EU Corporate Sustainability Reporting Directive (CSRD)
The EU Directive on Non-Financial Reporting (Non-Financial Reporting Directive, NFRD) has been replaced by the EU Corporate Sustainability Reporting Directive (CSRD). The CSRD now requires a broader range of companies to report on sustainability matters and mandates that reporting must be carried out in accordance with certain standards, the European Sustainability Reporting Standards (ESRS). The directive has not yet been transposed into national law in Germany and is currently being revised in the Omnibus procedure.  

EU Regulation on Deforestation-free Products (EUDR)
The EU Regulation on Deforestation-free Products (EUDR) applies from 30 December 2026 (and from 30 June 2027 for micro and small enterprises). It provides that companies may only place, make available on the EU market, or export from the EU the commodities beef and leather, wood, soy, coffee, cocoa, natural rubber, and palm oil, as well as certain products derived therefrom (hereinafter “relevant products”), if:

1. they are deforestation-free,
2. they have been produced in compliance with the relevant legislation of the country of production, and
3. a due diligence statement or a simplified statement has been submitted for them.

To ensure compliance, companies must fulfil certain due diligence obligations before placing relevant products on the market for the first time. These obligations include, in particular, the collection of relevant information (e.g. geolocation data and evidence of legality), the assessment of the risk of non-compliance, and, where necessary, the implementation of appropriate risk-mitigation measures. Compliance with these requirements must subsequently be confirmed in a so-called due diligence statement.

Simplifications apply to micro and small primary producers from low-risk countries: they are only required to submit a one-off simplified statement, which entails reduced data requirements (e.g. no mandatory provision of geolocation data).

Due diligence statements and simplified statements must be submitted via an information system provided by the EU. Relevant products may only be placed on the market once the respective statement has been successfully submitted.

Each due diligence statement or simplified statement is also linked to a reference number. This reference number must be passed on by the operator placing the product on the market for the first time when transferring the relevant product to the first downstream operator or trader within the EU. Downstream operators and traders who place, make available, or export relevant products are required to collect and retain this reference number together with certain purchase and sales data. As no further data transmission is required, the chain of activities ends with the first downstream operator.

EU Forced Labor Regulation (FLR)
The EU Forced Labor Regulation (Regulation on the prohibition of products made with forced labor on the Union market) was formally adopted by the Council of the European Union on November 19, 2024. The regulation was published in the Official Journal of the European Union on December 12, 2024 and entered into force the following day, December 13, 2024.

The regulation introduces a general ban on products made using forced labor. Economic operators are prohibited from placing such products on the market, making them available, or exporting them. The ban applies to all types of products and covers products manufactured within the EU and in third countries.
Important points for companies:

• The regulation applies to all companies (economic operators)
• This regulation does not introduce any additional due diligence or reporting obligations
• The Commission will create a database on forced labor risks in certain geographical areas or for specific products or product groups
• A new “Central Portal against Forced Labor” will be set up to support the enforcement of the new rules
• The regulation includes comprehensive support for small and medium-sized enterprises (e.g. through guidelines, consideration in investigation)

The Forced Labor Regulation entered into force on December 13, 2024 and will apply to all economic operators from December 14,  2027.

EU Regulation on due diligence in the supply chain of metals from conflict-affected and high-risk areas
The EU Regulation on due diligence in the supply chain of metals from conflict-affected and high-risk areas came into force on January 1, 2021. Its aim is to ensure that EU importers of tin, tantalum, tungsten, their ores and gold (referred to as 3TG) source these minerals only from responsible sources and not from conflict-affected or high-risk areas. The regulation imposes extensive due diligence and reporting obligations along the supply chain on EU importers of tin, tantalum, tungsten, their ores, and gold. These importers must apply risk management when purchasing raw materials, have this verified by an independent third-party audit and publish a report on this.

The German National Action Plan on Business and Human Rights (NAP)

The German Supply Chain Due Diligence Act is based on the National Action Plan on Business and Human Rights (NAP), which in turn reflects the requirements of the UN Guiding Principles.

The NAP therefore forms a solid foundation for the actions of German companies within their value and supply chains. To help systematically and structurally embed human rights due diligence processes into core business operations, the NAP outlines five key requirements (core elements):

1. A policy statement by company management on respecting human rights
2. A well-founded risk analysis on the potential adverse impacts of corporate activities
3. Risk-minimizing measures and their effectiveness monitoring
4. Reporting
5. Complaints procedure

Although the NAP addresses all companies, it also takes into account the perspective and specific challenges of small and medium-sized enterprises (SMEs). According to the NAP, companies should implement human rights due diligence processes in a manner appropriate to their size, sector and position in the supply chain.

The NAP is designed as a continuous process to promote the implementation of human rights due diligence. The previous NAP covered the period from 2016 to 2020, and a follow-up process is currently underway.