ESG in Germany: From the European Green Deal to the Supply Chain Due Diligence Act

Abstract

This article discusses the trend towards environmental, social and governance (ESG)-related laws in Germany in the context of Germany’s membership of the European Union (EU). As an EU member state, Germany is subject to a wave of recent directives and regulations that the EU passed as part of its so-called “European Green Deal”. However, Germany also has its own tradition of promoting the goal of sustainability in the law, including company law. The article first distinguishes relevant terminology as some regulations refer to ESG, whereas others to “sustainability”. It then traces the historic development of such laws in German law, including the traditional debate about the interest of the company in German law. This discussion is followed by a case study that critically examines the German Supply Chain Due Diligence Act of 2021 that continues to be subject to heated political discussions. The article demonstrates how ESG has, in recent years, become a compliance issue in Germany that is now a matter of consideration for boards. Keywords: sustainability; supply chain; LkSG; company law; implementation; Germany; corporate governance; compliance; human rights; ESG