The Supply Chain Due Diligence Act (in German Lieferkettensorgfaltspflichtengesetz or LkSG) comes into effect in 8 months, on January 1, 2023.
The law mandates large organizations to conduct due diligence on their supply chains to protect human rights and the environment. With up to 800,000 euros in fines, restricted market access, and the potential for lawsuits, compliance can’t wait — it’s an immediate imperative.
The scope of the Supply Chain Act will initially be limited to partnerships and corporations that have their headquarters, principal place of business, administrative headquarters, registered office or a domestic branch in Germany and employ more than 3,000 employees across the entire group (Konzern). From 2024, the Supply Chain Act will also apply to smaller companies with more than 1,000 employees.
It won’t stop with Germany, the European Union is following suit. It isn’t just Germany that is taking human and environmental rights more seriously as they pertain to supply chain management. The European Union is as well. In February, the European Commission adopted a proposal that aims to strengthen “sustainable and responsible corporate behavior throughout global supply chains.” While this due diligence law remains in preliminary stage, it would affect more businesses than Germany’s rule. For example, instead of companies with 3,000 employees as the baseline, it would impact businesses that employ at least 500 people on the payroll and have locations in any of the 27 countries that comprise the EU. The proposal may eventually impact small businesses.
With the Modern Slavery Act in place, the UK is currently not taking other actions. Read more about UK’s view on ”Transparency in supply chains: a practical guide” https://www.gov.uk/government/publications/transparency-in-supply-chains-a-practical-guide/transparency-in-supply-chains-a-practical-guide
Supplier Diversity & other ESG Supply Chain actions can support meeting the requirements; Contact