EU Directive Supply Chain Due Diligence Act (SCDDA) vs. German law SCDDA (in place since June 25, 2021)

“All large companies on the global market need to act now, in their supply chains and in their own practice areas,” said Federal Employment Minister Hubertus Heil on the introduction of the German Supply Chain Act (Lieferkettengesetz (LkSG)). “We have fought hard and established a law that has legal consequences and packs a real punch.” In the future, a careful risk analysis needs to be carried out to determine whether a violation of human rights and environmental standards occurred in the past or can be expected in the future. From 1 January 2023 the Act will initially apply only to large companies with their administrative headquarters or statutory seat in Germany that normally have at least 3,000 employees in Germany [section 1 (1) sentence 1]. According to the Explanatory Memorandum on the SCDDA, this concerns approximately 600-700 companies. A year later, this threshold will drop to at least 1,000 employees [section 1 (1) sentence 3 SCDDA], and will concern approximately 2600-3500 companies, according to the Explanatory Memorandum on the SCDDA. 

On February 23, 2022, European Commission has adopted a proposal for a Directive on corporate sustainability due diligence. The proposal aims to foster sustainable and responsible corporate behavior throughout global value chains. 

The new due diligence rules will apply to the following companies and sectors 

  • EU companies
    • Group 1: all EU limited liability companies of substantial size and economic power (with 500+ employees and EUR 150 million+ in net turnover worldwide). 
    • Group 2: Other limited liability companies operating in defined high impact sectors, which do not meet both Group 1 thresholds, but have more than 250 employees and a net turnover of EUR 40 million worldwide and more. For these companies, rules will start to apply 2 years later than for group 1. 
  • Non-EU companies active in the EU with turnover threshold aligned with Group 1 and 2, generated in the EU. 

The proposal will be presented to the European Parliament and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national law and communicate the relevant texts to the Commission.


 January 1, 2023 

January 1, 2024 


Large companies >3000 employees with admin headquarter or statutory seat 

Main Business areas and immediate suppliers 

Large companies >1000 employees with admin headquarter or statutory seat 

Date unknown, once law, to operationalize within 2 years

+2 years 


Limited Liability companies >500 employees and >150 M net turnover 

All Business areas and entire value chain 

Other limited Liability companies >250 employees and >40 M net turnover 

Differences and what you can do now 

The EU Supply Chain Directive is aimed at European-wide harmonized regulation. It is one of the numerous concrete implementations of the European Green Deal, which demands a sustainable corporate culture and is therefore ahead of the German LkSG. 

  • For now, the German Supply Chain Act is content with a policy statement, while the EU Directive sees ESG due diligence as an integral part of corporate policy. The EU directive will also require company management to take human rights, climate change and ecological consequences into account in all decisions. 
  • The German supply chain law has no direct regulation, although the BaFin issued a consultation paper in August 2021, in which the regulator sees ‘greenwashing’ as a big risk for the customers of investment funds. Greenwashing is when companies inflate their sustainability or “green” efforts typically through marketing or public relations activities. In its statement, the BaFin will conduct special audits and investigations if something seems amiss. 
  • Under the German LkSG, companies may only report on their own website, while under the EU directive, companies need to publicly communicate the exercised due diligence obligations. 
  • The German LkSG is satisfied with risk management that has been put in place, while the EU Supply Chain Directive provides for the establishment of a comprehensive compliance management system. In addition, due diligence processes are to be set up and monitored.

Mandatory / regulatory requirements 

  • The Board has to name a ‘Human Rights’ delegate 
  • The Board also has to set the ‘Human Rights’ strategy 
  • More work for the internal legal department as the international suppliers may have different laws and regulations to follow; increased reputational risk with more reliance on suppliers 
  • Agencies like BAFA (Bundesamt für Wirtschaft und Ausfuhrkontrolle), German regulator for economy and export control will be the new watchdog for this law. 

Highly advisable / recommendable 

  • Whistleblowing directive will also come into play as whole new playing field. 
  • CPI (Corruption Perception Index) – good reference to get started with supplier management 
  • Corporate Social Responsibility (CSR) reporting duty if listed so may not be applicable. 
  • Increased focus on supplier management and suppliers in general (direct vs indirect suppliers) 
  • Increased focus for HR department as regulatory Human Rights management new requirement 

The work plan has 6 planned phases. Onboarding requirements of suppliers; initial due diligence; checks, reviews and valuation of suppliers; risk mitigation of high vs low risk suppliers; transparency and controls aspects; and monitoring of all suppliers. 

Next steps 

It’s highly advisable to start as soon as possible if you are identified to be in scope. From the analysis above, we also recommend you not comply to the minimum requirements of the German LkSG, but rather start implementing a long-term strategy already thinking about the EU Directive. 

Our multidisciplinary teams will help you with the initial set up and implementation. Our expert knowledge of Compliance and Risk Management will support you in order to avoid missteps, potential fines and reduce conduct as well as reputational risk you may face. 


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