Supply chain due diligence

Supply Chain Due Diligence Act: Corporate Responsibility for Human Rights

The Supply Chain Due Diligence Act (LkSG) came into force on January 1 , 2023. It regulates for the first time the responsibility of companies to respect human rights in supply chains.

Key elements of due diligence obligations include :

• The establishment of a risk management system to identify, prevent or minimize the risks of human rights violations and environmental damage.
• Obligation to comply with the prevention and remediation measures defined by law.
• Complaint procedures and regular reports.

Due diligence obligations apply to :

• A company's own business activities.
• The actions of a contractual partner.
• Actions of other (indirect) providers.

The law initially applies to companies with :

• At least 3000 employees in Germany from 2023.
• At least 1000 employees as of 2024.

The Supply Chain Act contains a comprehensive catalogue of eleven recognized international human rights conventions, including :

• Prohibition of child labour, slavery and forced labour.
• Disregard for health and safety at work.
• Deduction of an appropriate salary.
• Lack of awareness of the right to form trade unions or workers' representatives.
• Denial of access to food and water.
• Unlawful deprivation of land and livelihood.

Fines may be imposed if companies fail to comply with their legal obligations. These can reach 8 million euros or up to 2 % of the annual worldwide turnover. The turnover-based fine framework only applies to companies with an annual turnover of more than €400 million.

The Federal Office for Economic Affairs and Export Control (BAFA) has implemented the Supply Chain Act at its new office in Borna from 1 January 2023. The BAFA has broad supervisory powers, including :

• Enter the business premises.
• Request information and inspect documents.
• Call on companies to take concrete steps to meet and enforce their obligations by imposing penalties.

To support companies in the implementation of their due diligence obligations, the BAFA prepares and publishes documents. BAFA makes the documents available on its own website of the Supply Chain Act.

How ComplyMarket can help you:

• Setting up a risk management system and performing a risk analysis
• Adoption of a Policy Statement on the Human Rights Strategy
of Business
• Establishment of preventive measures
• Immediate implementation of corrective measures in case of violations found
• Setting up a complaints procedure
• Documentation and reporting requirements to meet due diligence requirements
• ComplyDoC: is an intelligent computing solution and the first open-source code cloud solution for supply chain sustainability, chemical compliance, and product management to collect information from the company.suppliers.