LkSG abolished - but the obligation remains: Digital evidence management for the EU CSDDD
Sustainable supply chain
Ecological overexploitation is reaching threatening proportions worldwide and is continuing to rise rapidly. Child labor is also increasing every year (around 160 million children worldwide according to UNICEF). We need to do more to combat other major problems such as wage injustice and forced labor. In Germany, the Supply Chain Duty of Care Act (LkSG) therefore came into force in 2021. Now it is to be abolished again - at first glance a signal for reducing bureaucracy. Unfortunately, however, manufacturers cannot sit back and relax, as the European Corporate Sustainability Due Diligence Directive (CSDDD) will come sooner than they would like, and it sets even stricter standards.
Despite the planned abolition of the German Supply Chain Act, it remains essential for manufacturing companies to implement comprehensive, legally compliant verification management for regulations as well as CSR and ESG/environmental requirements. This is the only way for companies to avoid severe penalties and meet the increasing expectations of consumers and business partners for sustainable, responsible action. Investment in in-depth sustainability management along the supply chain should therefore not be scaled back, but should continue 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
Thanks to material.one's affiliation with the adesso Group, manufacturers also benefit from the expanded adesso portfolio, which is supported by the new strategic partnership with ESG solution provider osapiens
It includes digitalization solutions for CO₂ accounting and ESG reporting for Scope 3. This allows environmental key figures from the supply chain to be evaluated based on data and reported in accordance with the requirements of the CSDDD. And all this 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.