The Federal Ministry of Labor and Social Affairs (BMAS) publishes a draft bill to amend the LkSG (Landesgenossenschaftliche Forschungs- und Sozialgesetz – State Law on State Citizenship).

The Federal Ministry of Labor and Social Affairs (BMAS) published its draft bill on July 28, 2025, to amend the Supply Chain Due Diligence Act (LkSG). The draft bill provides significant relief for companies. Key points include the abolition of the reporting obligation and a restriction of the penalties for violations. The Federal Office for Economic Affairs and Export Control's (BAFA) powers of inspection, however, remain unchanged. Elimination of the Reporting Obligation – Relief for Companies The central change in the draft bill is the complete abolition of the reporting obligation. If the BMAS draft is adopted unchanged, companies will no longer be required to prepare, publish, or submit an annual report to the responsible Federal Office for Economic Affairs and Export Control (BAFA). Section 10 of the LkSG is to be amended accordingly: The current "documentation and reporting obligation" will then be reduced to a mere documentation obligation. This would also eliminate Sections 12 and 13 of the Local Government Data Protection Act (LkSG), which previously regulated the submission and official review of reports. For companies, this means a significant reduction in bureaucracy: According to the explanatory memorandum, the annual compliance burden should decrease by approximately €4.1 million. The obligation to maintain internal documentation will remain in place. Companies must therefore continue to be able to demonstrate that they are fulfilling their due diligence obligations. The documentation must be retained for at least seven years. Adjustments to administrative offenses and official controls: The offenses subject to fines in Section 24 of the Local Government Data Protection Act (LkSG) are to be significantly reduced. In the future, only violations of the following obligations will be subject to fines: The obligation to take timely preventive measures pursuant to Section 6 Paragraph 1 of the Local Government Act (LkSG), The obligation to take timely remedial measures pursuant to Section 7 Paragraph 1 of the Local Government Act (LkSG), The obligation to develop and implement a time-bound plan to end or minimize violations of human rights or environmental regulations at direct or indirect suppliers pursuant to Section 7 Paragraph 2 and Section 9 Paragraph 3 No. 3 of the Local Government Act (LkSG), The obligation to establish an effective complaints procedure pursuant to Section 8 Paragraph 1 of the Local Government Act (LkSG). A missing or incorrect risk analysis (Section 5 of the Local Government Act (LkSG)) would no longer constitute an administrative offense. In practice, however, risk analysis remains indispensable, as preventive measures can only be taken on the basis of a risk analysis. Those who fail to conduct a risk analysis cannot implement preventive measures – and this remains subject to fines. Sections 14 et seq. of the LkSG (State Law on Local Government) also remain unchanged: The BAFA (Federal Office for Economic Affairs and Export Control) retains its comprehensive powers of inspection. Companies must therefore continue to expect risk-based audits and orders. What happens next? The draft bill is still undergoing inter-ministerial review. After consultation with associations and cabinet approval, the government draft will be submitted to the Bundestag (Federal Parliament). Cabinet approval is scheduled for September 3, 2025. Entry into force is expected shortly after its promulgation; the changes to the reporting obligation are intended to apply retroactively from January 1, 2023. The adjustments to the penalty regulations will come into force the day after their promulgation. Recommendations for companies: If the draft is adopted in the legislative process as submitted by the Federal Ministry of Labor and Social Affairs (BMAS), companies can discontinue their statutory reporting obligation, as it will be retroactively abolished from January 2023. However, those who wish to continue reporting for reasons of transparency or as part of voluntary sustainability reporting can do so – voluntary reporting remains possible, which can be particularly useful for stakeholder communication. Regardless, companies should not neglect their internal processes: The documentation obligation remains in place, meaning that all measures taken to fulfill due diligence obligations must be recorded in a traceable manner and retained for at least seven years. Likewise, effective risk management remains essential, as risk analyzes form the basis for prevention and remediation measures. Without a risk analysis, no effective prevention or remediation measures can be implemented, which will continue to be subject to fines. The Federal Office for Economic Affairs and Export Control (BAFA) remains authorized to monitor compliance with the Supply Chain Compliance Act (LkSG). Furthermore, companies should review whether their complaint procedures meet legal requirements and prepare for potential BAFA audits. Despite the elimination of the reporting obligation and the adjustments to the regulations governing administrative offenses, the authority remains empowered to conduct comprehensive audits. Companies are therefore well advised to ensure their compliance structures are legally sound. If processes are streamlined due to the upcoming elimination of the reporting obligation, the level of protection should remain unchanged. The draft legislation provides noticeable relief but does not represent a departure from core obligations. Companies should view the changes as an opportunity to make their supply chain compliance more efficient and legally compliant.