FAQ about the German Supply Chain Due Diligence Act (LkSG)
What is the LkSG?
The Supply Chain Due Diligence Act (LkSG) is the German supply chain law. The German federal law governs the economic activities of companies based in the Federal Republic of Germany by imposing human rights due diligence obligations on them, which they must observe within their supply chains.
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​It was adopted by the Bundestag on 11 June 2021 as Article 1 of the Act on Corporate Due Diligence Obligations in Supply Chains. The subsequently required publication in the Bundesgesetzblatt (Federal Law Gazette) took place on 22 July 2021 so that the law could enter into force on 1 January 2023. You can find the full law text here.
To whom does the LkSG apply?
Since 2024, the LkSG applies to German companies with more than 1,000 employees. Affected are direct and indirect customers and suppliers.
What are the sanctions for companies that do not (correctly) implement the LkSG?
Sanctions are up to EUR 8 million and exclusion from tenders.​
How do companies implement the LkSG?
​​Deliverables are: a self disclosure, risk analysis, risk management, grievance mechanism, public reporting. Please see the fundamental tasks and the process tasks for compliance below.
Fundamental tasks for compliance with the German Supply Chain Act
Human rights violations like child labour, modern slavery and environmental damage occur in many high-risk industries and high-risk countries on a daily basis in global supply chains. Hence, many global governments published laws to protect vulnerable people and contain the pressing global issue.
Companies shall be included in the obligation to source and produce more responsibly. They need to make their supply chain transparent so that risks and violations become visible and can be fixed.
bizpando is the platform that helps companies to implement the following requirements.
The due diligence measures required by the German Supply Chain Act are composed of three initial tasks to build the fundament and six provisions for the ongoing risks and complaints process.
Introduce a complaints procedure
The company has to ensure that a complaints
procedure is in place. It enables persons to
point out human rights and environmental
risks and violations that have arisen as a
result of the economic activities of a
company in its own business operations or
those of a direct or indirect supplier.
Place responsibility on someone in-house
A person within the company needs to be
assigned to be responsible for the risk management. Such a person should have a good understanding
and a transparent view on the company's global overall supply chain.
Establish a
risk management system
Measures have to come into effect to minimize the risk of violations and to stop their occurences in the case of the company having caused or contributed to them within the supply chain. Such measures are
managed through a risk management
system.
Process tasks for compliance with the German supply chain law
Identify
risks &
complaints
The company has to identify the human rights and environmental risks and complaints in its own business area as well as those of its suppliers.
Analyze
risks &
complaints
The company has to analyze, priories and weigh up the identified risks and complaints and then communicate the results internally to the decision makers.
Create
reports
The company shall prepare a report on the fulfilment of its due diligence obligations in the previous financial year and make it publicly available free of charge.
The company has to take action for analyzed risks by issuing a policy statement on its human rights strategy and by implementing preventive measures in its own business and with its suppliers.
Take
preventive
action
Take
corrective
action
The company has to take corrective actions for existing violations reported through the complaint’s procedure and other information sources.
Write
documentation
The company has to document the fulfilment of due diligence obligations on all process steps and store documentation for at least seven years.
Full text of the LkSG
Please click on the following button to then choose the text box of the LkSG:
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