Complying with the German Supply Chain Due Diligence Act
Prevent and end environmental and human rights violations by complying with the latest supply chain due diligence regulations.
What is the German Supply Chain Due Diligence Act?
Effective January 2023, the Supply Chain Act in Germany requires companies to fulfill due diligence obligations to prevent human rights and environmental violations. It currently applies to firms with 1,000 or more employees based in Germany or branches operating in the country.
Navigating through the German Supply Chain Due Diligence Act
Many components in your supply chain must stay compliant with due diligence laws to ensure your workers and the environment are protected. But where to start? You may have questions like:
- What steps can we take to identify and mitigate potential risks related to supply chain transparency and human rights violations?
- What strategies can we employ to proactively oversee compliance among our vendors, suppliers and business partners?
- How do we ensure continuous compliance with training obligations for our workforce, including education on supply chain due diligence and risk assessment?
- How can we effectively monitor and adapt our organization’s employee policies and procedures to align with the requirements?
- How do I keep track of compliance requirements as changes to the Act become effective?
The consequences of non-compliance are real – and costly
While the German Supply Chain Due Diligence Act (LkSG) is only recently in force, thousands of companies must now align to these requirements – and the consequences of non-compliance are costly.
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4,000
number of organizations
that currently need to comply with the German Supply Chain Due Diligence Act
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€8 M
or 2% annual global turnover
is the maximum penalty for violating the LkSG
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52%
of manufacturing companies
located or doing business in Germany are directly or indirectly impacted by the Act
Common German Supply Chain Due Diligence Act challenges
Navigating challenges under the German Supply Chain Act demands a strategic approach.
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Unify your team’s understanding
Overlooking mandatory training can result in non-compliance, which leads to reputational risks. Without your workforce understanding the correct processes, unethical or unsustainable practices could slip through the net.
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Ensuring transparency across the supply chain
Failure to establish openness and supply chain transparency may lead to legal consequences, damage to brand reputation and stakeholder dissatisfaction.
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Beyond mere record-keeping
Inadequate documentation could result in non-compliance and hinder the ability to demonstrate compliance with the Act, potentially leading to policies being mishandled.
Guidance on the German Due Diligence Supply Chain Act:
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Procurement Risk Management Challenges & Solutions
NAVEX One helps procurement professionals manage third-party risk, ensure supply chain transparency and make integrity a cross-organizational value.Learn more
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LkSG: Latest News and Learnings on the German Supply Chain Act
As a follow-up to the webinar we hosted at the end of last year, this webinar will look back at key developments from the last few months, as well as learning experienced since the act came in to …Learn more
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Whistleblowing and the Protection of Human Rights in the Supply Chain
Learn more
So, what’s in it for your organization?
Ensuring your company’s supply chains and environmental footprint are compliant greatly benefits your organization. How?
- Legal compliance: Adhering to the Act is crucial for companies to avoid legal repercussions, penalties and fines.
- Ethical responsibility: Complying with the Act reflects a commitment to ethical business practices and gains employee trust.
- Reputation management: Conforming to the Act protects your company’s reputation. Stakeholders, including customers, investors and partners, increasingly value businesses that demonstrate a commitment to sustainability and ethical supply chain practices.
- Market access and partnerships: Open doors to international trade and collaborations by aligning with the expectations of countries and organizations promoting responsible supply chain management.
- Risk mitigation: Help mitigate risks associated with supply chain disruptions, legal issues and reputational damage.
German Supply Chain Due Diligence Act essentials
The German Supply Chain Due Diligence Act establishes vital standards for supply chain integrity. To effectively address these requirements, your company must follow these essential steps:
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Educate stakeholders on supply chain due diligence
Ensuring supply chain compliance starts with a comprehensive training program for stakeholders. Training should encompass understanding the Act’s regulations, emphasizing the significance of supply chain diligence and the repercussions of non-compliance.
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Develop comprehensive supply chain due diligence policies
The cornerstone of compliance lies in creating robust and well-documented policies for supply chain due diligence. These policies should cover the entire lifecycle of the supply chain, outlining procedures from sourcing to disposal. Clear guidelines on how to handle, store and transmit sensitive information must be defined.
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Regularly assess and monitor supply chain safeguards
Continuously monitoring safeguards is imperative to ensure sustained compliance with the Act. Conducting regular audits, risk assessments and internal reviews helps to identify any vulnerabilities or gaps in the supply chain due diligence measures.
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Effectively manage partners with access to the supply chain
Given the reliance on third-party entities in the supply chain, meticulous management of these relationships is crucial. This involves implementing measures to prevent unauthorized access or mishandling of sensitive information within the supply chain.
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Implement a compliance system
Companies should implement a quality compliance system that tracks, monitors and predicts potential risks within the supply chain. A system that provides a holistic view helps keep all the moving parts in check.