The law’s name always was a mouthful. Now Germany has pulled some teeth out of its regulatory tiger, the Lieferkettensorgfaltspflichtengesetz (LkSG), or Supply Chain Due Diligence Act. The external reporting obligations under the law have been abolished immediately and retroactively.

Beginning on 1 October 2025, the country’s Federal Office for Economic Affairs and Export Control (BAFA) ceased reviewing corporate due diligence compliance reports. This follows a decision a month prior by the German federal cabinet to amend the supply chain law. 

In force since January 2023, the LkSG regulates corporate responsibility for upholding human rights in supply chains and protecting the environment. By removing the external reporting obligation, the government aims to reduce the bureaucratic burden and competitive disadvantage for companies in Germany. 

Fines will now only be imposed for breaches that have been defined as particularly serious within the framework of the LkSG. However, companies are still required to identify, assess, and mitigate risks in their supply chain.

Germany’s supply chain law will likely remain in effect until the EU Corporate Sustainability Due Diligence Directive (CSDDD) is transposed into national law. The CSDDD introduces human rights requirements and environmental due diligence obligations across all EU member states. 

However, due to a current revision of the CSDDD on the EU level (“Omnibus I”), the future scope, content and first application of the directive are still being discussed. 

Supply chain risk does not disappear when external reporting obligations are dropped. In fact, undetected risk can present an even greater threat to supply chains. If companies do not know where risks are, they are unable to prepare for events and prevent disruption. 

This is particularly true for climate hazards. Extreme weather is often an underrated threat, along with the associated acute physical risks such as floods, or chronic risks such as droughts. Wildfires destroy assets, storms knock out infrastructure, persistent drought backlogs inland waterways. Such risk events frequently result in delays and additional costs.

Manufacturers could suffer production downtime if a natural hazard event such as a tropical storm strikes a key supplier. Even worse, it could affect two or more suppliers in the same region. To understand risk exposure in the supply chain, businesses need location-specific data and insights.

By combining geospatial data with risk analytics, Munich Re’s Location Risk Intelligence enables companies to evaluate exposure to natural hazards and environmental vulnerabilities across the supplier network. This lets manufacturers safeguard their own operations, reputation, and finances:

+ Improve transparency. Companies can document their climate risk management and inform internal and external stakeholders about current activities in detail.

+ Simplify disclosure. Mandatory ESG reporting has not gone away. Businesses need to ensure climate risk reports are compliant with ESG regulatory standards. For European companies, this includes the EU Taxonomy or the CSRD, for example.

+ Identify opportunities. Future climate projections allow companies to select sustainable locations and properties. With accurate natural hazard assessments, managers make better decisions.

While corporate LkSG reports no longer need to be published, prioritising supply chain visibility is key to upholding ethical and environmental expectations. Companies share the responsibility to uphold human rights, prevent child labour, and protect the environment. 

At the same time, the underlying acute and chronic climate risks in global networks persist. By managing natural hazard risk, supply chain leaders go beyond compliance checklists to mitigate the risk of disruption and ensure business continuity.