The Supply Chain Due Diligence Act (LkSG)

The Supply Chain Due Diligence Act

• legislative process in Germany and at EU level.
• Overview of other national regulations in Europe.
• Outlook for the upcoming EU Supply Chain Directive (CS3D).
• Scope of the Supply Chain Due Diligence Act.
• Which companies are affected?
• Which suppliers are included?

Which human rights do the due diligence obligations relate to?

• Integrity of life and health.
• Freedom from slavery and forced labor.
• Protection of children and freedom from child labor.
• Freedom of association and the right to collective bargaining.
• Protection from torture.
• Prohibition of disregarding the respective nationally applicable occupational health and safety obligations.
• Prohibition of withholding an appropriate wage; compliance with minimum wage regulations.
• Prohibition of unequal treatment and discrimination of employees.
• Prohibition of the unlawful seizure of land, forests and bodies of water during acquisition, development or other use.
• Environmental obligations to protect human health.
• The ban on the import and export of hazardous waste.

Overview of the main due diligence obligations for companies

• Expansion of the existing compliance organization to include sustainability and human rights aspects in the supply chain.
• Declaration of principle on respect for human rights.
• Risk management to avert potential negative impacts on human rights.
• Risk analysis: Procedure for determining adverse effects on human rights.
• Complaints management, documentation and reporting.

Risk management and risk analysis

• Requirements for appropriate and effective risk management.
• Carrying out a risk analysis for the company's entire business area and all direct suppliers.

Preventive measures

If corresponding risks are identified within a supply chain as part of the risk analysis, preventive measures must be taken. These can be, for example

• Necessary changes to contractual arrangements with suppliers.
• Expansion of a "Code of Conduct for Suppliers", in which the company sets out its binding expectations for cooperation with suppliers.
• Obligation of the supplier to adhere to these compliance standards in the downstream supply chain as well.
• Regular reviews of existing and future suppliers with regard to their ability to comply with due diligence obligations.
• Introduction of control rights and implementation of regular and risk-based control measures.
• Requesting proof from the supplier that training has been carried out.

Remedial measures

• Necessary remedial measures in the event of suspected violation of the legal positions to be protected at direct suppliers.
• Termination of the business relationship.

Due diligence obligations for indirect suppliers

• What due diligence obligations apply to indirect suppliers.

Competent authority, powers

Provisions on fines

• Competent authority: BAFA.
• Powers, access rights, information and disclosure obligations.
• Obligations of the company to cooperate.