German Chancellor Merz Urges EU to Abandon Supply Chain Sustainability Law

Key Takeaways

• Chancellor Merz’s Call for Cancellation: German Chancellor Friedrich Merz urged the European Union to eliminate the Corporate Sustainability Due Diligence Directive (CSDDD), citing the need to reduce regulatory burdens on businesses.
• CSDDD Overview: The CSDDD mandates companies to address human rights and environmental risks in their supply chains, including issues like child labor, pollution, and deforestation.
• German Supply Chain Act (LkSG): Merz’s government had previously planned to replace Germany's national LkSG law with the CSDDD, but now seeks its complete repeal at both the national and EU levels.
• EU’s Proposed Amendments: The European Commission has proposed changes to simplify compliance under the CSDDD, including limiting due diligence to direct partners and extending the review period for monitoring from annually to every five years.
• Delays in Implementation: The EU has agreed to delay the implementation of the CSDDD until 2028, but Merz argues that further regulatory rollbacks are necessary for European businesses to remain competitive.

Deep Dive

In a statement made during his first visit to Brussels as Chancellor, Friedrich Merz, Germany's newly appointed leader, called for the European Union to scrap the Corporate Sustainability Due Diligence Directive (CSDDD). This directive, adopted in May 2024, mandates that companies take action to address their negative impacts on human rights and the environment throughout their supply chains.

Merz’s comments, delivered alongside European Commission President Ursula von der Leyen during a press conference on Friday, reflect his administration's commitment to reducing regulatory burdens on businesses. The statement follows Germany’s coalition agreement, which included the promise to revoke the country’s own Supply Chain Act (LkSG), a national law similar to the CSDDD that requires companies to conduct due diligence on human rights and environmental risks in their supply chains.

Despite plans to replace the LkSG with the EU’s CSDDD, Merz has now called for a complete overhaul of both national and European regulations. “We will revoke the national law in Germany, and I also expect the European Union to follow suit and really cancel this directive,” Merz declared.

The CSDDD imposes significant obligations on companies, compelling them to identify, assess, prevent, mitigate, address, and remedy adverse impacts related to human rights abuses such as child labor, forced labor, and environmental harm like deforestation, pollution, and ecosystem damage. These requirements cover both upstream supply chains and certain downstream activities, including distribution and recycling.

Although the legislation was formally adopted in 2024, it underwent extensive revisions following pushback from industry groups, ultimately scaling back the number of companies affected and extending the timeline for full implementation. In February, the European Commission introduced proposals to ease compliance burdens by limiting due diligence obligations to direct business partners, with extended timelines for monitoring and reduced data collection from small companies in the supply chain.

In a move welcomed by some, the EU Parliament recently agreed to delay the CSDDD’s implementation by one year, now set for 2028. Merz, however, sees this postponement as only a partial victory. While acknowledging the delay as a "first step," he insisted that it is "the next logical step" to fully repeal certain directives, particularly the CSDDD.

Merz's call to eliminate the CSDDD comes at a time of heightened debate about the impact of sustainability regulations on businesses. His remarks reflect a broader push within the German government to alleviate compliance pressures, while also signaling a shift in Europe's approach to sustainability regulations, potentially reshaping how companies will address supply chain risks in the future.

As the European Commission continues to review and update the directive, Merz's stance has already sparked reactions across both the political and business landscapes. Stakeholders will be closely watching how the EU navigates this growing divide between sustainability goals and corporate competitiveness.

The debate on the future of the CSDDD is far from over, and further developments are expected as lawmakers and business leaders continue to engage in discussions over the direction of supply chain sustainability laws.

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