German Supply Chain Due Diligence Act (LkSG)
Lieferkettengesetzes or LkSG requires companies that have their principal place of business in Germany and that employ at least 3,000 people (and starting January 2024, 1,000 or more) to disclose their due diligence measures to prevent and mitigate the risks of human rights violations and environmental damage. The law also indirectly impacts thousands of suppliers to those companies, not just in Germany.
The companies within the scope of the law are required to:
- Carry out regular, at least annual, human rights and environmental risk analyses of their operations and those of their direct (or in some cases indirect) suppliers
- Conduct ad hoc risk analyses for indirect suppliers where there is substantiated knowledge that human rights and environmental abuses exist
The law is designed to be consequential – penalties for non-compliance can range up to two percent of a company’s annual turnover. However, it comes with a raft of guidance from BAFA, the German government agency overseeing the implementation of LkSG, and established methodological pathways to be compliant.
Learn more about how EcoVadis solutions can support your company with LkSG-aligned risk analysis and compliance.