EU supply chain law to be relaxed: compliance systems remain essential for companies

The EU Parliament has once again voted on the so-called Supply Chain Act and has opted for a significantly watered-down version. Nevertheless, supply chain compliance remains essential for companies.

Following the German draft law to relax the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG), the EU Parliament adopted a resolution on 13 November 2025 on its negotiating position to simplify sustainability reporting and due diligence obligations for companies.

• By raising the thresholds, many companies shall no longer be subject to sustainability reporting and due diligence obligations.
• Content requirements are to be reduced, particularly regarding reporting standards and obtaining information along the supply chain.
• Nevertheless, uncertainties remain for companies, and functioning compliance systems remain indispensable.

In detail:

Higher thresholds

The thresholds above which a company will (in future) be required to report on sustainability are to be raised significantly. In future, only companies with an average of more than 1,750 employees and an annual net turnover of more than 450 million euros shall be required to report on social and environmental issues.

Similar plans also exist for supply chain due diligence obligations. In future, these shall only apply to companies with more than 5,000 employees and annual net turnover of over 1.5 billion euros.

Simplified reporting requirements

In addition to raising the thresholds, the European Parliament's plans also provide for significant content changes.

The reporting standards for sustainability reporting are to be significantly simplified. To this end, the number of reporting items shall be reduced, and industry-specific reporting shall become voluntary in future. In addition, better protection for smaller companies is envisaged, with them only being required to pass on information to larger business partners to a limited extent.

Amended supply chain due diligence obligations

There will also be comprehensive changes to supply chain due diligence obligations. In future, affected companies shall no longer be obliged to systematically obtain information from smaller business partners, but will only have to request information in exceptional cases. Transition plans to bring the business model into line with the goals of the Paris Climate Agreement are to be cancelled in future.

According to Parliament’s plans, the guidelines for sanctions in the event of violations shall be determined by the Commission and the Member States. Fines for due diligence violations and the right of affected persons to full compensation shall continue to be taken into consideration. The Parliament's plans also provide for the creation of a digital portal with comprehensive information on EU reporting requirements and corresponding templates to simplify the practical implementation of these requirements.

Impact on companies

The planned simplifications are part of numerous efforts by European and German legislators to reduce the bureaucratic burden on companies. German legislators have also already introduced a draft bill to relax the German Supply Chain Act (we reported on this here).

However, decision-makers in companies should not jump to conclusions simply based on the reports of planned simplifications.

Firstly, it should be noted that the negotiating position approved by the European Parliament is not legally binding. Until a final and legally binding amendment to the relevant legal acts comes into force, changes may still be made during negotiations with the Commission and the Member States.

Even if the amendments proposed by Parliament were to enter into force in their current form, this would not eliminate all reporting and supply chain due diligence obligations for companies. The core of the obligations envisaged to date will remain in place, particularly for large companies. Fines and damage claims will also continue to be imposed for breaches of supply chain due diligence obligations.

Compliance structures should therefore not be scaled back, and developments at European and national level should continue to be closely monitored.

We support our clients in ensuring that their due diligence obligations are legally compliant, both within their own companies and throughout the entire value chain. Our focus is on German and European requirements for supply chain compliance and corporate reporting obligations, e.g. under the Corporate Sustainability Reporting Directive (CSRD). We also take all related legal issues into consideration and ensure that all relevant compliance and governance topics are covered comprehensively and from a single source.

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