CSDDD vs. LkSG: A comparison of the new European supply chain law

With the adoption of the Corporate Sustainability Due Diligence Directive (CSDDD)—often referred to as the EU Supply Chain Act—the European Union set new standards for corporate due diligence in the summer of 2024. German companies are now faced with the urgent question: What will change compared to the already established LkSG?

This article classifies the new directive and highlights the key differences that companies need to prepare for.

What is the CSDDD? (Classification)

The CSDDD is an EU directive that obliges companies to identify, avoid, or minimize the negative impacts of their business activities on human rights and the environment. Unlike the German law, which primarily focuses on risk management, the EU directive requires, in part, the results-oriented elimination of abuses.

The directive came into force on July 25, 2024. Member states (including Germany) now have two years (until July 2026) to transpose these requirements into national law. For Germany, this means that the LkSG is likely to be tightened and amended.

The timeline: When does the CSDDD apply to whom?

It will be applied in stages and depends on the size of the company and its turnover. The scope of application will initially be narrower than that of the current LkSG, but will then expand.

• From July 26, 2027: Companies with > 5,000 employees AND > €1.5 billion in global net turnover.
• From July 26, 2028: Companies with > 3,000 employees AND > €900 million in global net turnover.
• From July 26, 2029: Companies with > 1,000 employees AND > €450 million in global net turnover.

(Note: Non-EU companies that generate this revenue within the EU are also affected.)

The 4 most important differences: CSDDD vs. LkSG

Although the German LkSG served as a blueprint, the European directive goes significantly further in key areas.

1. Depth of the value chain

• LkSG (status quo): The focus is primarily on the company’s own business area and direct suppliers (Tier 1). Indirect suppliers (Tier 2 to Tier N) only have to be checked if there is “substantiated knowledge” of violations (on a case-by-case basis).
• CSDDD (new): The term “supply chain” is expanded to “activity chain.” This includes not only suppliers (upstream), but also some downstream activities such as transport, storage, and disposal of the product. Companies must therefore analyze risks much more deeply and broadly.

2. Civil liability

• LkSG (status quo): German law explicitly excludes civil liability (para. 3 § 3 LkSG). Affected parties can file complaints, but cannot directly sue for damages based on the LkSG.
• CSDDD (new): This is the EU’s biggest lever. The directive introduces civil liability. In the future, companies can be sued if they intentionally or negligently violate their due diligence obligations and cause damage (e.g., to people or the environment). This massively increases the liability risk for management.

3. Environmental and climate protection

• LkSG (status quo): Environmental aspects play a subordinate role (focused on mercury, POPs, and hazardous waste) and mostly serve to protect human health.
• CSDDD (new): Environmental protection is massively expanded (e.g., biodiversity loss, deforestation). In addition, the CSDDD requires companies to create and implement a Climate Transition Plan that is compatible with the 1.5-degree target of the Paris Agreement.

4. Thresholds (revenue vs. employees)

• LkSG (status quo): Applies strictly to companies with 1,000 or more employees, regardless of revenue.
• CSDDD (new): Introduces a turnover threshold (see schedule above). This means that a company with 1,200 employees but low turnover may fall outside the scope of the CSDDD, whereas it currently falls fully under the LkSG. It remains to be seen how German lawmakers will adapt the LkSG (principle of favorability).

Outlook: Need for action despite transition periods

Even if the CSDDD deadlines (starting in 2027) still seem far away, waiting is not a strategy. The German LkSG will be amended. Companies that are already LkSG-compliant have a good basis (gap analysis recommended). Companies that have fallen through the cracks so far but will reach the new revenue thresholds should start setting up a risk management system now.

The most important message: The CSDDD turns sustainability from a “compliance exercise” into a hard liability risk.