Germany Act on Corporate Due Diligence Obligations in Supply Chains
Governmental Agency: German Government
Jurisdiction: Germany
Ref no: Federal Gazzette, 2021, 1.46
Status: ADOPTED
The Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) was adopted in June 2021, and came into force in 1 January 2023. It requires companies to conduct appropriate human rights and certain environmental due diligence on their supply chains to ensure compliance with all prohibitions. These include:
- Core human rights violations such as child and forced labor, modern slavery, discrimination, inadequate labor protections and wage withholding
- Particular environmental violations such as the production/use/treatment of mercury added products and waste, the production/use of chemicals under the POPs (Persistent Organic Pollutants) Convention, and the export/import of certain hazardous wastes.
The due diligence obligations for companies include:
- Establishing a risk management system
- Designating a responsible person or persons within the company to manage due diligence responsibilities
- Conducting regular risk analyses
- Issuing human rights policy communications
- Establishing preventive measures within the business and vis-à-vis direct suppliers
- Taking remedial action in the event of a violation of a protected legal position
- Establishing a complaints procedure
- Implementing due diligence measures with regard to risks at indirect suppliers
- Ensuring the documentation and reporting of due diligence data to the public authorities
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The Corporate Due Diligence Obligations in Supply Chains, or the Lieferkettensorgfaltspflichtengesetz (LkSG), will impact companies with headquarters, administrative headquarters, statutory headquarters or branches in Germany. The law will initially apply from entering into force to companies with at least 3,000 employees. However, from 2024 this will be expanded to all companies with 1,000 employees in Germany. Companies below these thresholds will not be directly impacted. However, if they are suppliers of companies that are obligated, operating in Germany or internationally, they may be indirectly affected by the due diligence processes put in place.
