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Supply Chain Due Diligence Act (LkSG).

The Supply Chain Due Diligence Act (LkSG) was passed by the German Bundestag in June 2021. The law is intended to improve the international human rights situation by setting out requirements for the responsible management of supply chains. As experts in the field of sustainability and purchasing, we support you in fulfilling your due diligence obligations, identify and assess sustainability risks along your company's value chain and implement measures to prevent and minimize risks.

Background of the LkSG.

The increasing international integration of the economy and the complexity of global procurement and sales markets can lead to inadequate enforcement of internationally recognized human rights and environmental protection.

This is where the Supply Chain Due Diligence Act (LkSG) in Germany and the planned Supply Chain Act at EU level come in. They oblige companies to increase transparency in their value chains, identify potential social and environmental risks and manage them proactively.

The legislation is intended to help companies address areas of risk and act responsibly along their value chains. Companies can contribute to sustainability by actively combating child labor and forced labor, respecting labor protection regulations and freedom of association and unionization, combating discrimination, ensuring fair pay and providing access to food, water and health. It is also important to avoid environmental damage and use resources sustainably in order to minimize the ecological impact along the value chain. These comprehensive measures aim to create a more sustainable and fairer supply chain that contributes to the protection of people and the environment.

Area of application of the LkSG.

The law is applicable from January 1, 2023 for companies based in Germany and companies with a branch office pursuant to Section 13 d HGB with at least 3,000 employees in Germany. From January 1, 2024, companies with at least 1,000 employees in Germany will be covered.

The Supply Chain Due Diligence Act applies to the entire supply chain of companies - from the extraction of raw materials to delivery to the end customer, including the company's own business unit, direct and indirect suppliers. Consequently, the LkSG can also affect companies that do not fall within the scope of the law, for example if they act as a supplier to a company affected by the LkSG. The due diligence obligations of the affected companies are graded according to the possibility of influence.

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Duties of care. Your advantages

Instead of viewing the Supply Chain Duty of Care Act as a primary compliance issue, companies should see it as an opportunity to gain a competitive advantage. Improved transparency across the value chain is the basis for deriving further optimization potential, such as efficiency increases, opportunities for (co-)innovation or a more resilient supply chain design. In addition, customers and consumers are increasingly demanding sustainability and, in particular, transparency about working conditions in the supply chain, which represents an opportunity for companies to position themselves and increase their brand value. Investors and the capital market also reward appropriate consideration of ESG aspects.

Procedure

We support your company in implementing the requirements of the LkSG - from risk analysis to the derivation and implementation of measures, the implementation of effective risk management through to documentation and reporting. In doing so, we work closely and effectively with all corporate functions involved.

Analyze risks.

As part of the risk analysis, human rights and environmental risks are identified and assessed in the company's own business area and in the supply chain. We have developed appropriate process models and tools for this purpose, which we coordinate with the stakeholders and functions involved in the customer organization and adapt as necessary. As part of the risk analysis for the supply chain, we consider both country and product group risks and evaluate them according to the probability of occurrence and severity of impact, among other things. For the risk assessment of our own business activities, we determine the net risks by analyzing existing management systems, processes, procedural instructions, responsibilities and other established measures in the companies concerned.

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Preventive and remedial measures take action.

Based on the results of the risk analysis, general and risk-specific measures are derived, initiated and implemented to ensure compliance with due diligence and to avoid and minimize identified risks. These include, for example, the adoption of a policy statement, the introduction of a complaints procedure and the implementation of various preventive and, if necessary, remedial measures in your own business area and in the supply chain. Depending on your needs, we support you in deriving and implementing the measures, including the selection of suitable IT solutions.

Establish risk management.

As part of risk management, we support you in defining procedures and responsibilities for fulfilling your duty of care and establishing them in the long term. The measures initiated are regularly reviewed in terms of their progress and effectiveness. We determine the extent to which the due diligence obligations can be integrated into existing risk management processes and systems and work with you to define roles and responsibilities, taking into account the various functions involved.

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Documentation and reporting.

The procedure, measures and results for fulfilling the due diligence obligation must be documented internally and reported externally on an annual basis. We use process descriptions to support you with the internal documentation of procedures and help you prepare for external reporting.

Enquire now and fulfil your duty of care.

Your contact person

Laura Echternacht

Director

+49 157 8530 4315

E laura.echternacht@sustainable.de