This law, officially known as the “Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains (LkSG)”, was passed by the German Bundestag in 2021 and aims to ensure that human rights and environmental due diligence obligations are observed along the entire supply chain. Entry into force of the law:
- Since January 1, 2023, the law has applied to companies with at least 3,000 employees in Germany.
- Since January 1, 2024, the scope of application has been extended to companies with at least 1,000 employees in Germany.
Important to know: A similar bill is currently being discussed in the EU Parliament, which could potentially apply to companies with 200–250 employees and/or a turnover of €50 million from 2025. Basically, every company is affected: Regardless of size, every company is part of a supply chain and has a responsibility to comply with it.
Customers will increasingly demand proof of compliance with these obligations, covering the entire journey of a product or service from raw material to end consumer. Global supply chains at a glance: An illustrative example is a T‑shirt that is transported up to 18,000 km before being sold in a German store, where up to 450 people may be involved in the process — from cotton pickers to truck drivers. Challenges: Global supply chains often conceal serious abuses such as child labor, slavery, forced labor, exploitation, discrimination, lack of labor rights and environmental degradation. Implementation of the law:
- Expand due diligence obligations: Companies are obliged to check their supply chains for risks, analyze and evaluate them at least once a year.
- Reporting: Mandatory publication of the human rights and environmental strategy is required.
- Organizational adjustments: The measures include defining responsibilities, specifying contact persons, drawing up a policy statement on respecting human rights, carrying out risk analyses and establishing a risk management system including remedial measures.
Beware of risks: If risks or violations become known in any part of the value chain, companies are obliged to take appropriate measures. Conclusion: The Supply Chain Act places a significant responsibility on companies to ensure respect for human rights and environmental standards along the entire supply chain.
It calls on companies to act proactively and make their supply chains transparent and sustainable. Find out more in our free webinar on March 1, 2024!
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