LkSG abolished - but the obligation remains: Digital evidence management for the EU CSDDD
Sustainable supply chain
Environmental exploitation is reaching alarming levels worldwide and continues to rise rapidly. Child labor is also on the rise every year (about 160 million children worldwide, according to UNICEF). It is necessary to step up efforts to combat other major problems, such as wage inequality and forced labor. For this reason, the Supply Chain Due Diligence Act (LkSG) came into effect in Germany in 2021.Now there are calls to repeal it — at first glance, a sign of reduced bureaucracy. Unfortunately, however, manufacturers cannot simply sit back and relax, because the European Corporate Sustainability Due Diligence Directive (CSDDD)will arrive sooner than they’d like, and it sets even stricter standards.
Despite the planned repeal of the German Supply Chain Act, it remains essential for manufacturing companies to implement a comprehensive, legally compliant documentation management system for regulatory requirements as well as CSR and ESG/environmental requirements. This is the only way for companies to avoid severe penalties and meet the rising expectations of consumers and business partners regarding sustainable, responsible conduct. Investments in in-depth sustainability management along the supply chain should therefore not be scaled back but rather continued to be expanded, as it is becoming even more important than before.
On July 5, 2024, the CSDDD was published in the Official Journal of the EU (Directive (EU) 2024/1760) and sets new standards for corporate due diligence obligations. The EU member states must transpose the CSDDD into national law by July 2026. In Germany, this will lead to adjustments or new regulations that go beyond the content of the current LkSG.
What exactly needs to be considered and which companies are subject to the EU Supply Chain Directive?
Scope and timing: A phased approach
The CSDDD will be applied to affected companies in stages. Specifically, staggered transition periods are planned, depending on the size of the company:
From July 26, 2027: Companies with more than 5,000 employees and a worldwide net annual turnover of more than EUR 1.5 billion must comply with the requirements of the directive.
From July 26, 2028: Companies with more than 3,000 employees and over EUR 900 million turnover are added.
From July 26, 2029: The scope of application will be extended to companies with more than 1,000 employees and more than EUR 450 million in sales worldwide.
Digital transformation as a prerequisite
Compliance with the CSDDD is hardly possible without digital support. Companies must record, evaluate and verify ESG data across all levels of the supply chain (tier 1 to tier n). This requires end-to-end systems, automated processes and central platforms for communication, documentation and auditing.
Strong combination of suitable solutions to meet CSDDD requirements
material.one for efficient release and verification management
The cloud platform integrates PLM, QMS and ESG systems from companies in the manufacturing industry to create an end-to-end solution for traceable, automated and efficient release and verification management across all levels of the supply chain - from tier 1 to tier n. This creates the basis for secure and scalable implementation of CSDDD requirements.
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Expansion through the Scope 3 portfolio from adesso
Because material.one is part of the adesso Group, manufacturers also benefit from the expanded adesso portfolio, which has been further enhanced by the new strategic partnership with the ESG solutions provider osapiens
It includes, among other things, digitalization solutions for CO₂ accounting and Scope 3 ESG reporting. This enables data-driven assessment of environmental metrics from the supply chain and reporting in accordance with CSDDD requirements. And all of this is achieved with a very high degree of integration into existing systems and infrastructures.
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Conclusion
The abolition of the LkSG does not mean any relief - on the contrary: the requirements are increasing significantly with the CSDDD. Companies are well advised to invest in digital solutions now in order to future-proof their supply chains. With material.one and adesso, a strong foundation is created for sustainable, transparent and legally compliant processes in line with regulatory and social expectations.
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With material.one all stakeholders can collaborate a standardized manner in a compliance conforming way based on the "need to know". As an industry cloud platform, material.one provides information on material and material sampling, percentage of recycled material, certificates as well as CO₂ footprint information.