Background Overview: Background Sustainability and CSR International frameworks: guides for global business Benefits for companies CSR national Overview: CSR national National CSR Forum CSR Policies in Germany CSR international Overview: CSR international The EU's CSR policy CSR: the global dimension
NAP Overview: NAP About the NAP Overview: About the NAP Objectives Development of the Action Plan Four action areas of the NAP Original version of the NAP Monitoring UN Guiding Principles NAP International Commitment of the Federal Government Overview: Commitment of the Federal Government The state's duty to protect Activities of the Federal Government Cooperation with stakeholders Corporate due diligence Overview: Corporate due diligence Federal Government expectations Five core elements of due diligence Access to remedy and remediation Supply Chain Act Overview: Supply Chain Act Background and development Implementation by enterprises FAQ Europe Overview: Europe EU supply chain law initiative EU regulation on conflict minerals EU Timber Regulation G7-Presidency 2022 Implementation support Overview: Implementation support Sector dialogues Overview: Sector dialogues Automotive Industry Energy Sector Dialogue About the dialogues Setting up the dialogues The role of the Federal Government Information, advice, training and networks Overview: Information, advice, training and networks Information and advice Networks and training Guidance documents Overview: Guidance documents General guidance documents Sector-specific guidance documents #FairSupplyChains dialogues
CSR Background CSR national CSR international Business & Human Rights NAP About the NAP Commitment of the Federal Government Corporate due diligence Supply Chain Act Europe Implementation support Sector dialogues Information, advice, training and networks Guidance documents

Workshop 4: Creating clarity: The relationships between the Act on Corporate Due Diligence in Supply Chains, EU Deforestation-free Regulation (EUDR) and the Corporate Sustainability Reporting Directive (CSRD)

Dialogue series #FairSupplyChains for companies

The workshop on 13 February in Hamburg focused on how the various regulatory approaches relate to each other and what differences and areas of tension there are. Here you can find the key results of the workshop:

Criticism: The regulations are not sufficiently harmonised

A unified implementation process (integrated approach) within companies to comply with various regulations can generate significant efficiency gains by leveraging synergies between different regulatory frameworks. However, this approach presents challenges as regulations differ in their methodologies, terminology and definitions, and at times impose contradictory requirements on businesses. Additionally, these regulations were enacted, or will come into effect, at different times. Newly established processes may soon need to be adjusted. This also makes it more challenging to develop a unified compliance process.

The most significant contradiction arises from the conflict between ‘result-based obligations’ (particularly under the EU Deforestation Regulation (EUDR)) and ‘best-efforts obligations’ (CSDDD/ Supply Chain Due Diligence Act (LkSG)). The EUDR requires that relevant products may only be placed on the EU market, made available in the EU, or exported from the EU if they are deforestation-free, produced in compliance with the local legislation of the country of origin, and supported by a due diligence statement. The EUDR does foresee risk mitigation measures, but if an identified risk cannot be reduced to a negligible level or eliminated, the respective product is considered non-compliant and, therefore, cannot be placed on the EU market. While the EUDR does not impose an obligation to terminate business relationships, the requirement for products to meet the legal standards outlined above creates a strong incentive to do so in cases of non-compliance.

In contrast, the due diligence obligations under the LkSG/CSDDD establish a best-efforts obligation to prevent, bring an end to, or mitigate the effects of human rights violations or violations of environmental obligations. The principle of "empowerment before withdrawal" applies, meaning that if a risk or violation occurs, a company should not immediately end its business relationship with a supplier but should first work towards improving human rights and environmental conditions. The obligation to terminate the business relationship is considered a measure of last resort under the LkSG.

Requests: Legal certainty, legal clarity and reliability

There is an urgent need for consistent and harmonised regulations at EU level. Businesses seek long-term legal certainty for planning, as well as guidance and assistance (in the form of EU Commission guidelines) rather than a shift or reduction in the scope of application or renewed discussions on the content of laws that have already been adopted. It should also be considered that companies are already taking steps to implementing these laws internally and are making financial investments to do so. The inconsistency in the legal framework penalises companies that are taking early steps to comply, leading to confusion and a loss of trust in regulatory institutions.

Many stakeholders consider it practical to use the CSDDD as a foundational legal framework for corporate due diligence obligations, with other laws, such as the EUDR, building upon it. The terminology and approaches of other related regulations should be aligned with the CSDDD and adapted accordingly.

With regard to reporting obligations, emphasis should be placed on streamlining requirements and ensuring consistency. In particular, companies should not be required to report the same content multiple times or provide the same information to multiple regulatory bodies.

Coordinated action required at EU and national levels

Companies clearly expect both European and national governments to resolve inconsistencies between regulations and establish clear requirements for uniform standards and quality criteria. The implementation of EU regulations at national level and the development of support measures should also be coordinated between all relevant parties. It is also important to note that the division of regulatory responsibilities across different authorities places a burden on businesses. To reduce this burden and improve legal certainty, companies are calling for guidance from the government on an integrated approach to compliance with different regulations, specifically regarding questions such as: How should different regulations be coordinated and applied together in practice? How should potential conflicts between regulatory requirements be addressed?

Integrated approach: Addressing all regulations in one process

An “integrated approach” refers to a coherent, company-wide compliance process that enables businesses to comply efficiently with multiple regulations. This approach can reduce administrative burdens, optimise resource allocation, and prevent excessive demands on suppliers. To achieve this, companies are partially relying on integrating responsibilities, existing processes, data and systems (e.g. human rights risk management systems, environmental management systems, life cycle assessments of products) in order to streamline compliance efforts. In particular, a consolidated data management system, the integration of risk analysis (LkSG or CSDDD) and materiality assessments (CSRD) as well as integrated reporting processes can offer significant efficiency gains.

Many businesses are still in the early stages of implementing multiple regulations at once. When adopting an integrated approach, a key challenge is how to structure internal cooperation and assign responsibilities. Since corporate structures vary, there is no one-size-fits-all solution. However, a practical starting point is to use the due diligence obligations under the LkSG/CSDDD as the core framework and integrate other regulatory requirements into it. Furthermore, experience has shown that compliance management is most effective when organisational responsibility is assigned at the executive level, as multiple departments typically need to work together.

Back to the overview