The German Supply Chain Act Lieferkettensorgfalts¬pflichtengesetz: LkSG, is aimed at preventing human rights violation along its supply chain by framing standards related to responsible supply chain management for companies. This due diligence requires companies to implement processes to identify, assess, prevent and address issues pertaining to both human rights and environmental risks in their supply chain.

LkSG will take effect from January 1, 2023, for companies with more than 3,000 employees and from January 2024 for companies with more than 1,000 employees.

The supply chain due diligence act applies to all companies with their central administration, principal place of business, administrative headquarters, statutory seat, or branch office in Germany. The obligations include the following.

• Establishing risk management system
• Regular risk analysis and assessment
• Implementation of human rights policies
• Delegation of responsibilities internally for human rights protection
• Establishing preventive measures in their organization and their suppliers
• Establishing due diligence procedures for their indirect suppliers
• Establishing complaint procedure for notification of any violation
• Actions to be taken in case of any violation
• Reporting & documentation

The nodal authority to implement this framework is the Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle). The nodal authority can exercise its power to visit business premises, demand information, inspect documents and demand that corporates take concrete action to fulfil their obligations. Additionally, impose financial penalties.

You can contact us if you wish to take your next steps to comply with the new regulation. You can also view the full supply chain due diligence-related information here