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The German Supply Chain Due Diligence Act (SCDDA) has introduced a new legal standard for companies established in Germany to protect people and the environment harmed by their global supply chain operations. Companies must comply with the standards outlined in the German Supply Chain Act. The LkSG is the latest ACT in a series of rolling regulations companies must follow in order to demonstrate corporate social responsibility and the protection of human rights.

The LkSG applies to companies with more than 500 employees that are either headquartered in Germany or have their main place of business in Germany. The law covers companies operating in all sectors, including manufacturing, agriculture, mining, and construction. The law requires companies to disclose their due diligence measures to prevent and mitigate the risk of human rights abuses and environmental damage in their global supply chains. Companies must also report on the effectiveness of these measures. The LkSG is enforced by the German Federal Ministry for Economic Affairs and Energy, and is a powerful reminder that companies have an ethical responsibility to ensure their supply chains are free from abuse. This step forward also protects human rights and the environment, so it's good for everyone!

The critics of this law are not without merit. One argument against it is that companies may see a race to the bottom in terms supply chain standards, which could lead us down an unhealthy path for all involved with business transactions worldwide.

The LkSG is an interesting addition to the growing global body of legislation aimed at ensuring that companies take responsibility for their supply chains. The law serves as a reminder that businesses have not only moral but also legal obligations when it comes down human rights and environment protection, which they will be held accountable.

The LkSG is also a reminder that the German government is taking action on this issue. In recent years, the government has been criticized for not doing enough to combat forced labor and other abuses in global supply chains. The LkSG shows that the government is committed to addressing these problems, and that it is willing to hold companies accountable for their role in them.

If you supply goods or services to Germany, it's important to be aware of the requirements of the Lieferkettengesetz (LkSG), or German Supply Chain Due Diligence Act (SCDDA). Non-compliance with the LkSG can result in significant penalties, so it's important to understand the requirements and take steps to ensure compliance.

What can you do to protect your business?

  1. Ensure that your business is aware of the LkSG and its implications. You should also review your supply chain and policies to make sure that they are in compliance with the new law. If you have any questions or concerns, you should contact a qualified lawyer who can advise you on how to proceed.

  1. Take action to ensure that your suppliers are in compliance with the LkSG. FRDM can help you do this by risk ranking the highest priority suppliers using proprietary risk analysis trusted by companies like Boeing and Coca Cola.  If you find that your suppliers are high risk, FRDM helps you take steps to remedy the situation.

  1. Monitor your suppliers on an ongoing basis. This includes ensuring that they continue to comply with the LkSG, and that they do not engage in any practices that could jeopardize your own compliance. FRDM helps you do this by monitoring your entire supply chain up to the n-th tier.

  1. Take corrective action if you find that your suppliers are not in compliance with the LkSG. This may include terminating your relationship with the supplier, or requiring them to take corrective action. FRDM can help your suppliers with corrective action plans and digital remediation tools.

  1. Review your supply chain on a regular basis. The LkSG requires companies to exercise due diligence throughout their supply chains in order to address risks of forced labor and other human rights abuses. This includes assessing risks, implementing policies and procedures to mitigate those risks, and conducting regular monitoring and reporting. FRDM is  designed to improve your supply chain’s resilience and transparency at a fraction of the cost of consultants or questionnaire driven solutions.

The LkSG is an important step forward in the fight against forced labor and other abuses in global supply chains. It is a reminder that businesses have a role to play in protecting human rights and the environment, and that they will be held accountable if they fail to do so. The German government has shown that it is committed to addressing these issues, and it is clear that other countries will need to follow suit if we are to make progress in combating these abuses.

This is an issue that is not going away anytime soon, and it is important to be prepared. The LkSG is a step in the right direction, but it is only the beginning. We need to continue to work together to build responsible supply chains. FRDM is here to help, so please don't hesitate to reach out if you have any questions. Thanks for reading!

Do you have any thoughts on the LkSG? Get in touch with us!

Justin Dillon

Justin Dillon is the founder and CEO of FRDM, a responsible supply chain company.