The German Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) came into force on January 1, 2023. The law is intended to create a legal framework to improve the protection of environmental, human and children's rights along global supply chains. The primary aim of the new Supply Chain Act is to protect key human rights along the entire value chain, including outside the company's own operations. This means that companies must also critically examine the activities of their direct and indirect suppliers with regard to human rights violations. A central component of this is to enforce the ban on child and forced labor.
It initially applies to companies with at least 3,000 employees, and from January 2024 also to companies with at least 1,000 employees. The legal form of the company is irrelevant. The main administrative or statutory seat or the main branch must be located in Germany. It should be noted that the law also applies to companies that have a branch office in Germany in accordance with Section 13d HGB. This means that subsidiaries may also fall within the scope of the law. The law also has an indirect impact on small and medium-sized enterprises (SMEs), as they may be involved in the supply chain.
Companies are required to submit a declaration of principles. This includes the strategy for compliance with human rights, as well as the human rights-related expectations of employees and suppliers in the supply chain. The requirements from the policy statement can be distributed, controlled, logged and monitored with R2C_.
Responsibility for the Supply Chain Due Diligence Act (LkSG) can be managed centrally or decentrally - staff or line
Use of exogenous data such as the Human Freedom Index, Transparency Corruption Index etc. to evaluate suppliers.
Detailed analysis of "risk" suppliers by means of sanctions list comparison, adverse media, questionnaires and/or on-site audits.
Illustration by means of a whistleblower system in the form of a complaint form on the company's website or intranet.
- Supplier risk management
- Permanent screening and monitoring for immediate identification of new risks
- Historization process: generation of historical reports and comparison of current and historical data
- Survey management
- Questionnaire function for supplier surveys
- Comprehensive monitoring by means of indicator management
- Integrated complaint management (reporting and whistleblower system)
- policy management
- compliance audits
- BI reporting
- Integration into existing ERP systems
- Audit-proof mapping of legal requirements
