Supply Chain Due Diligence

Supply Chain Due Diligence Act: Corporate Responsibility for Human Rights Compliance

The Supply Chain Due Diligence Act (LkSG) went into effect on January 1, 2023. It regulates corporate responsibility for compliance with human rights in supply chains for the first time.

The key elements of due diligence obligations are:

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

Due diligence obligations apply to:

• a company's own business activities.
• Actions of a contractual partner.
• activities of other (indirect) suppliers.

The law initially applies to companies:

• 3,000 At least 3,000 employees in Germany by 2023.
• At least 2024 out of 1000 employees.

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

• prohibition of child labor, slavery and forced labor.
• Ignoring occupational health and safety.
• Deduction of an appropriate fee.
• Ignoring the right to form trade unions or employee representatives.
• denial of access to food and water.
• ey Unlawful deprivation of land and livelihoods.

Fines may be imposed if companies do not comply with their legal obligations. These can be worth up to 8 million euros, or up to 2 percent of global annual sales. The turnover-based thin framework only applies to companies with annual sales of more than 400 million euros.

The Federal Office for Economic Affairs and Export Control (BAFA) has implemented the Supply Chain Act in its new field office in Borna from January 1, 2023. BAFA has wide-ranging control powers, such as:

• Enter the workplaces.
• request information and review documentation.
• Ask companies to take concrete steps to meet their obligations and implement them by implementing penalty payments.

BAFA develops and publishes proceedings to support companies in meeting their due diligence obligations. BAFA makes the papers available on its own Supply Chain Act website.

How ComplyMarket can help you:

Setting up a risk management system and conducting risk analysis

• Adoption of a policy statement on corporate human rights strategy
• Establishment of preventive measures
• Immediate implementation of corrective measures in case of detected legal violations
• Establishment of the complaints procedure
• Documentation and reporting requirements to meet due diligence requirements
• ComplyDoC: is an intelligent IT and the first open source cloud solution for Supply Chain sustainability, chemical and product compliance Management to collect information from suppliers.