Study by IntegrityNext and BME assesses two years of German Supply Chain Act
Munich, Germany – January 23, 2025 – Two years after the German Supply Chain Due Diligence Act (LkSG) came into force, IntegrityNext and the German Federal Association for Materials Management, Purchasing and Logistics (BME) present the results of their fourth joint study. The study provides practical insights into the implementation of the LkSG, analyzes its added value for companies and sustainability initiatives, and highlights the implications for future regulations such as the EU Supply Chain Due Diligence Directive (CSDDD). Although the LkSG has been widely criticized since its introduction, it is clear from this study that it is having an impact in practice and enabling sustainable progress.
Voluntary implementation and progress among affected companies
The fourth edition of the study provides insights for the first time from companies that will be subject to the requirements of the LkSG from 2024. Although one-third of the companies surveyed are not directly subject to the law, 81 percent of them are voluntarily implementing some of the requirements.
The main reasons cited by companies for this voluntary implementation are preparation for the CSDDD, which is mentioned as a driving factor by 71 percent of companies, and growing pressure from customers (65%). This shows that sustainability requirements are not only regulatory but also strongly market-driven.
“The results of our study show that the LkSG is more than just a regulatory requirement – it offers the opportunity to make global supply chains more transparent, fairer and more sustainable. Companies that actively shape this change not only strengthen their future viability, but also set a strong example for responsible business practices, ideally preparing them for the upcoming EU Supply Chain Directive (CSDDD),” explains Nick Heine, CCO of IntegrityNext.
Implementation learnings since 2023
Companies that have been subject to the requirements of the LkSG since January 1, 2023 report significant progress in implementation: Many companies rely on control mechanisms such as self-disclosures, prequalifications and contractual assurances when working with suppliers to ensure compliance with due diligence requirements.
Digital solutions are also playing an increasingly important role: 85 percent of large companies rely on software solutions and automation, primarily from third-party providers, to implement the LkSG. By comparison, the figure for small and medium-sized companies (with fewer than 1,000 employees) is significantly lower at 40 percent, which suggests that they have different resources and capacities.
The German Supply Chain Act – a driving force for sustainable business
For 69 percent of large companies with more than 1,000 employees, supply chains represent a decisive lever for greater sustainability. At the same time, transparency across the entire supply chain remains a key challenge: 47 percent of the companies surveyed state that they do not have sufficient knowledge of the sustainability risks of indirect suppliers.
The study clearly shows that the LkSG has a positive influence on sustainability in supply chains. Around half (51%) of the companies surveyed see the law as a support for driving sustainability in the supply chain. Among the most important positive effects are increased transparency (79%), risk prevention (68%), and easier implementation of their own sustainability goals and standards (68%). The LkSG has been widely criticized since its introduction, particularly with regard to its practical feasibility and the burden it places on companies. However, the results show that regulatory frameworks not only present challenges, but also enable concrete progress and make an important contribution to responsible business practices.
Long-term impact on business strategies
Finally, the study showed that due diligence laws such as the LkSG can trigger far-reaching changes in the corporate landscape in the long term. 70 percent of the companies surveyed expect a stronger focus on supply chain management and transparency, while 56 percent assume that the topic of sustainability will be more firmly anchored in business strategies. In doing so, 52 percent are adapting their goals and KPIs to meet the new requirements.
Some companies are going even further and fundamentally realigning their product and service portfolios, which has far-reaching consequences for the entire supply chain. At the same time, more and more investments are being made in digital solutions that enable more efficient monitoring of supply chains. These technologies are setting new standards for transparency and efficiency and helping to meet the increased sustainability and due diligence requirements. In doing so, 80 percent rely on the use of modern technologies. However, only five percent of the companies surveyed use explicit AI tools.
Progress with challenges
Two years after its introduction, the LkSG is starting to have a noticeable effect: not only is it driving sustainability efforts, but it is also preparing companies for emerging challenges such as CSDDD. For 80 percent of respondents, the law provides a valuable basis for preparing for the EU Supply Chain Directive. Companies benefit from increased awareness of sustainability issues, both internally and among their suppliers, as well as from the development of necessary processes and structures. However, despite all the progress, implementation remains complex and resource-intensive – especially with regard to the integration of indirect suppliers and the use of digital solutions.
Nick Heine warns of the consequences of a possible suspension of the Supply Chain Act for German companies: “A suspension would not only create uncertainty, but also undermine the progress that has already been made in setting the crucial course for sustainable supply chains. Our customers also confirm time and again: stopping now means starting all over again later – with higher costs and under greater pressure when the EU Corporate Sustainability Due Diligence Directive (CSDDD) is transposed into national law. Because by then at the latest, companies will once again find themselves confronted with the requirements.”
Dr. Lars Kleeberg, Chief Executive Officer of the German Federal Association for Materials Management, Purchasing and Logistics (BME), summarizes the results: “Two years after the Supply Chain Due Diligence Act came into force, it is clear that the Act provides important impetus for sustainability and human rights, but its implementation remains challenging. In particular, transparency in supply chains and the integration of indirect suppliers present companies with complex tasks. Our survey makes it clear that with clear guidelines, digital support and a harmonization of EU standards, the law can become an effective tool. It is now up to policymakers and industry to work together to create the conditions for a sustainable future.”
About the study
The written online survey was conducted over a period of almost two months, from mid-September to mid-November 2024, and was addressed primarily to the member companies of BME e.V. The participation rate was 166. Among others, numerous senior executives were surveyed. The study focused on companies in the manufacturing and technology-intensive sectors, which often have particularly complex supply chains.
Almost one-third (30%) of the participating companies have between 1,000 and 3,000 employees and will therefore fall under the LkSG for the first time since January 1, 2024. At the time of the survey, these companies had already been dealing with the new regulations for an average of around ten months. Slightly more than a third (37%) of the companies have over 3,000 employees and can therefore already look back on almost two years of LkSG implementation. For the remaining participants (34%) with fewer than 1,000 employees – defined as SMEs for the purposes of this study – there are no direct legal obligations under the LkSG. Nevertheless, as in previous years, the vast majority of these companies want to implement at least some of the requirements of the law. Only questions that were actually answered were considered in the evaluations.
About IntegrityNext
As a global leader in supply chain sustainability software, IntegrityNext stands at the forefront of corporate sustainability and compliance. Since 2016, businesses have trusted IntegrityNext to simplify ESG compliance, reduce risks, and address critical challenges like due diligence, decarbonization, and sustainability reporting. With over 500 customers and 2 million suppliers across 190 countries, IntegrityNext is transforming supply chains into engines of transparency and sustainable growth.
