On 11 June, the German Bundestag passed the Act on Corporate Due Diligence in Supply Chains (Lieferkettensorgfaltspflichtengesetz - LkSG). Companies with +3,000 employees or more in Germany will be required to take responsibility for human rights and environmental standards in their supply chains from 1 January 2023 onwards. From 1 January 2024, the threshold will drop to 1,000 employees.

The supply chain refers to all of a company's products and services and covers everything from raw materials to finished products, both domestically and abroad. Companies to which the Act applies are obliged to take active precautions. Direct suppliers of large companies must therefore be prepared to prove compliance with human rights and environmental obligations. Regarding indirect suppliers, companies to which the Act applies must implement due diligence processes if they become aware of a possible violation ("substantial knowledge"). It can be assumed that the obligations of the large companies will be passed on to the SMEs as suppliers.

In some other European countries, corresponding regulations already exist for supply chains, (France: Loi de vigilance; Netherlands: Child Labour Due Diligence Law). At EU level, a similar project could be implemented. The EU is planning an even more far-reaching Directive that also sets good governance in supplier countries as a goal.

 

Article contributed by Moritz Böcker, bvdm

 

Contact: Laetitia Reynaud

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