The German Supply Chain Act, also known as "Lieferkettengesetz (LkSG)", requires affected companies to monitor and safeguard human rights and environmental standards in their own operations and supply chains.
Which companies are affected?
The law took effect on January 1, 2023, and initially applied to companies operating in Germany with more than 3,000 employees. Since January 1, 2024, companies with more than 1,000 employees are also affected.
Challenges and obligations under the German Supply Chain Act
Affected companies face various challenges and obligations under the Supply Chain Act:
- Safeguarding of human rights and environmental standards: Companies must ensure vital human rights and environmental standards are upheld in their own operations and by their direct suppliers. In the case of substantiated knowledge of a violation by indirect suppliers, companies must also take action.
- Establishment of a risk management system: Companies must implement an effective risk management system to prevent sustainability risks in the supply chain and take appropriate corrective measures.
- Regular risk analyses: The LkSG requires companies to conduct regular risk analyses to identify potential and actual risks related to human rights and the environment.
- Fines and reputational risks: Non-compliance with the requirements can result in fines and the exclusion from public tenders, and may entail reputational risks.
The implementation of the German Supply Chain Act poses significant challenges for many companies, especially concerning the collection and analysis of high-quality supplier data.
Is your company already LkSG-compliant?
In our white paper on the German Supply Chain Act you can find out how IntegrityNext supports companies in meeting the law's requirements in line with official BAFA guidelines.
