Protection of human rights and the environment along the supply chain
The German government has passed the Supply Chain Due Diligence Act (LkSG) to strengthen human rights and environmental protection along the supply chains of companies operating in Germany. From 2023, companies with more than 3,000 employees will be obliged to introduce a risk management system for suppliers. From 2024, this will already apply to companies with more than 1,000 employees.
Requirements of the LkSG
The risk management system is intended to help assess, mitigate and monitor human rights and environmental risks in the supply chains. The key requirements include
- Establishment of a risk management system
- Definition of an internal company responsibility
- Submission of a declaration of principle
- Regular risk analyses
- Preventive measures in our own business area and vis-à-vis direct suppliers
- Remedial measures in the event of violations
- Establishment of a complaints procedure
- Due diligence obligations for indirect suppliers
- Documentation and reporting
Consequences of violations
Violations of the law can result in costly sanctions. These include fines of up to 2% of annual turnover and exclusion from public tenders for up to three years. There is also the risk of damage to the brand and the resulting loss of sales.
Goals
The LkSG benefits people in supply chains, companies and consumers. Companies receive a clear, proportionate and reasonable legal framework for fulfilling their human rights due diligence obligations. Consumers can be sure that large companies in Germany in particular will have to place a stronger focus on fair production.
Monitoring and international connectivity
The implementation of the law is monitored by the Federal Office of Economics and Export Control (BAFA). The BAFA has powers of intervention and can impose fines and penalties. The requirements of the Act are based on the due diligence standard of the UN Guiding Principles and are internationally compatible.
Further information on LkSG and CSDDD can also be found here
