Act on Corporate Due Diligence Obligations in Supply Chains

Mar 2, 2022 | Supply Chain Management

(LkSG)- What is it about?

Whether consciously or unconsciously, violations of fundamental human rights and damage to our environment occur in globally networked value and supply chains. Such effects of corporate actions are to be prevented by the “Lieferkettensorgfaltspflichtengesetz” (LkSG). This law obliges companies to manage supply chains in a transparent, responsible and sustainable manner.

In this article, you will learn more about the “Act on Corporate Due Diligence Obligations in Supply Chains” (LkSG) and the purpose of its application. 

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The German Bundestag passed the law with the German title “Gesetz über die unternehmerischen Sorgfaltspflichten in Lieferketten” in July 2021. It applies to all companies with their head office, principal place of business, administrative headquarters, registered offices, or branch offices in Germany. For companies with at least 3,000 employees, the law will come into force on 01/01/2023. From 01/01/2024, it will also apply to companies with 1,000 or more employees in Germany.

In case of violation of the legal obligations, the competent authority, the Federal Office of Economics and Export Control, can impose fines of up to €8 million or up to 2% of the annual worldwide turnover. In addition, if a fine is imposed above a certain minimum amount, it is possible to be excluded from the award of public contracts (Source: Federal Office of Labor and Social Affairs).

By complying with due diligence obligations in Germany and assuming responsibility at the global level, we aim to

  • improve the international human rights situation along the supply chain,
  • ensure equal and fair competition conditions,
  • mitigate negative environmental impacts of corporate performance related to human rights violations.

To this purpose, companies are held accountable for their actions along the entire supply chain, as the due diligence obligations relate to their actions and the actions of contractual partners and suppliers.

The law expects companies to

  • establish a risk management system and the performance of regular, qualified risk analyses,
  • implement a transparent complaint management system,
  • implement prevention measures,
  • conduct continuous documentation and regular reporting on compliance with due diligence requirements.

Sustainable and legally compliant supply chain management is thus closely linked to general operational compliance management.

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What opportunities does LkSG offer you?

Apart from legal certainty, the implementation of the Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) offers multifaceted opportunities for your company:

  • Assume social responsibility on a global level: By supporting your suppliers and contractual partners in creating sustainable and fair working conditions, you can proactively contribute to protecting international human rights and avoiding damage to your image.
  • Improve quality standards and supply chain resilience: Establishing and maintaining a close, collaborative exchange with your suppliers will enable you to manage not only the quality of precursor products but also the adaptability and resilience of the supply chain. With the help of an effective complaints procedure, you also gain timely knowledge of possible violations and can initiate immediate corrections or adapt measures.
  • Assume responsibility for the environment: Reduce environmental risks by taking potential environmental impacts into account in risk management as well as in the design of preventive measures.
  • Communicate your commitment: Use the documentation and reporting requirements to inform interested parties about your commitment to implementing due diligence and dialog with employees and external stakeholders.

How can we help you?

1) Get in touch with us here: Tagueri AG and Global Sustainable Management GmbH

Tagueri AG and Global Sustainable Management GmbH are strong partners. We accompany you in implementing regulatory requirements on the way to a sustainable supply chain.

We offer:

  • Many years of experience with practical implementation in countries of production
  • Extensive knowledge of supply chains and possible risks
  • A network of local organizations
  • Cross-industry expertise from medium-sized to multinational companies
  • Joint strategic analysis and planning of necessary development measures in the context of the conceptual expansion of management systems
  • Operational support in the implementation of a holistic supply chain management system and sustainable documentation

2) Attend our online seminar “Das LkSG in der Praxis – Einblicke in praktische Anforderungen und Herausforderungen” on 04/06/2022 starting at 2 pm.

We would like to offer you practical insights into implementing the LkSG and highlight challenges, risks, and opportunities in various industries during the event. In addition, we would like to take the opportunity to exchange views with you on concrete challenges in fulfilling the due diligence requirements in your business environment and to introduce ourselves as an implementation partner.

Register here https://www.tagueri.com/lkgs-anmeldung for our free online seminar.

3) Let’s start your project together!

Written by:

Inke Ewald

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Written by:

Lena Grezella

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LICENCES:

  • Header Photo: “Logistics and transportation of International Container Cargo ship and cargo plane in the ocean at twilight sky, Freight Transportation, Shipping” / ©enanuchit / stock.adobe.com
  • Photo 2: “Lawsuit and justice concept, Lawyer working with partner at law firm. legal consulting discussion defendant punishment law in courtroom” / ©snowing12 / stock.adobe.com
  • Photo 3: Global logistics network distribution and transportation, Smart logistics, supply chain concept, Businessman touching on interface panel of global network distribution /©tippapatt / stock.adobe.com

 

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