German Supply Chain Due Diligence Act – Obligations, Implementation and Checklist for Companies
What is the German Supply Chain Act?
The German Supply Chain Due Diligence Act (officially: Act on Corporate Due Diligence Obligations in Supply Chains, short: LkSG) obliges companies to, Human rights and environmental protection in their global supply chains. The aim is to prevent abuses not only within their own operations but along the entire supply chain.
It obliges companies to exercise due diligence, such as Risk analyses, complaint mechanisms and documentation obligations. This is intended to contribute to sustainable economic activity.
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Further informationWhich German Supply Chain Due Diligence Act applies – and from when?
Since 1 January 2023, the law has applied to companies with more than 3,000 employees. From 1 January 2024, companies with more than 1,000 employees are also affected. Therefore, as of today, the Supply Chain Due Diligence Act applies to all companies in Germany with over 1,000 employees. It is irrelevant whether the employees are employed in Germany or abroad. Foreign companies with a German branch can also be affected.
What obligations arise from the Supply Chain Act?
The law requires companies to adhere to human rights and environmental standards based on clearly defined due diligence obligations. These include:
- Setting up effective risk management
- Conducting regular risk analyses
- Adoption of a statement of principles
- Implementation of preventative and remedial measures
- Establishment of a complaints procedure (e.g. whistleblowing system)
- Annual documentation and reporting to the Federal Office for Economic Affairs and Export Control (BAFA)
What grievances is the law intended to prevent?
Die Sorgfaltspflichten gelten für den own business unit, but also for Contracting parties and suppliers. This is intended to ensure that human rights violations or environmental crimes are identified not only within an organisation's own operations but also along entire global supply chains, and avoided in the future.
The law names the international conventions in which human rights and environmental obligations are set out and Supply chain risks defined.
The law stipulates, for example, specifically:
- Protection against child labour, forced labour and discrimination
- Protection against land grabbing
- Health and safety at work
- Right to fair wages
- The right to form trade unions
- Protection against environmental law violations
How to implement the Supply Chain Act in practice
The obligations for companies can be broken down into the following six aspects:
Embed risk management
The German Supply Chain Act stipulates that your company must establish appropriate and effective risk management, enabling you to identify human rights and environmental risks. Responsibilities must be established accordingly for monitoring compliance with due diligence obligations.
2. Conduct risk analysis
Companies must identify and prioritise risks in their supply chains. Once risks are identified, appropriate preventive measures must be taken. This includes, for example, contractual human rights clauses in supplier agreements or the delivery of training.
3. Publish statement of principles
Building upon the results of the risk analysis, a statement of principles will be published. This will publicly explain the company's responsibility for complying with due diligence obligations and outline strategies to identify and mitigate risks in the supply chain, and to prevent human rights and environmental standard violations.
4. Preventive measures and remediation plan
5. Introduce a whistleblowing system / complaint procedure
To enable the reporting of infringements, companies must establish a reporting channel (complaints procedure). This channel must allow internal and external individuals to report indications of potential or actual infringements of human rights or environmental duties along the supply chain – confidentially, securely, and without fear of reprisal.
Your company can design the procedure independently or use an external system, such as a digital one whistleblower system how that of LegalTegrity. The important thing is that the reporting channel is accessible to everyone who is aware of infringements – so not just those directly affected, but also third parties such as employees of suppliers or observers, as well as trade unions and NGOs.
With a digital reporting system such as LegalTegrity, which is available in over 40 languages, you can fulfil the requirements of a variety of laws, including the HinSchG, LkSG, AGG, the German Money Laundering Act, the GDPR, and many more, with one system.
Pursuant to Section 8, Paragraph 2 of the LkSG, a clearly formulated Standing orders necessary. Among other things, it must include information on the procedure for handling complaints, responsibilities and contact persons, the nature and scope of possible complaints, and dispute resolution mechanisms. Furthermore, protection measures for whistleblowers must be clearly stated.
The legally compliant reporting channel must: Requirements fulfill
- Accessibility: The reporting channel must be for Whistleblower to be accessible and multilingual, so that it is usable for people in their respective native languages.
- Confidentiality The identity and content of the report must be treated with the strictest confidentiality, for example through anonymous input options and secure data transmission.
- Independence The persons responsible for the procedure must be able to act impartially and be appropriately trained.
- Protection of whistleblowers Companies must ensure that no retaliation occurs against whistleblowers.
6. Reporting obligations and documentation
The annual report on due diligence obligations must be submitted to the BAFA and published on the company website no later than four months after the end of the financial year.
What happens in the event of violations of the supply chain law?
The reporting channel (complaints procedure) under the German Supply Chain Due Diligence Act must ensure the confidentiality of the reporting person's identity and the protection of their personal data. If such a complaints procedure is missing or does not comply with the law, your company may face Fines of up to €8 million or up to two percent of annual turnover (for companies with an annual turnover of more than 400 million euros). Furthermore, exclusion from public procurement can follow. Companies must therefore design internal processes to be compliant with the law and review them regularly.
Which sectors are particularly affected?
The following industries are typically particularly affected:
- Textile and Clothing Industry high risks of labour law violations, child labour, environmental pollution
- Electronics industry Use of conflict minerals, problematic raw material extraction
- Food industry Risks of land grabbing, poor working conditions, environmental damage
- Raw materials and mining sector massive risks relating to human rights and the environment
Criticism of the German Supply Chain Due Diligence Act
While the Supply Chain Act has long been called for by a variety of interest groups, it is also meeting with criticism in practice. Business associations such as the Federation of German Industries (BDI) and the Association of German Chambers of Commerce and Industry (DIHK) complain that Businesses disproportionately burdened by the law Environmental and human rights organisations, such as Greenpeace and Oxfam, on the other hand, criticise that the law does not go far enough and provides too few possibilities for sanctions.
Overview – frequently mentioned arguments:
PRO | CONTRA |
Protection of human rights Companies must ensure fair working conditions worldwide. | Bureaucracy and costs Companies must allocate significant human and financial resources. |
Environmental protection The law sets clear benchmarks for environmental standards in supply chains. | Disadvantage of location Companies could relocate to countries with lower standards. |
Legal certainty The LkSG provides a clear legal framework for corporate action. | Voluntariness as an alternative Some voices consider voluntary standards to be sufficient. |
Workforce protection Forced labour and child labour must be effectively combatted. | Unclear liability limits Companies don't always know when they have fulfilled their obligations sufficiently. |
Reliable minimum standards A legal framework ensures a level playing field for competition. | Transfer of political responsibility The responsibility for global injustices is being unilaterally pushed onto companies. |
What are the implications of the new coalition agreement of 14/04/2025 for the German Supply Chain Due Diligence Act?
The new federal government plans to abolish the existing Supply Chain Due Diligence Act (LkSG). It is to be replaced by a new „Act on International Corporate Responsibility“, which will transpose the European Supply Chain Directive (CSDDD) into national law with as little bureaucracy and as much enforcement-friendliness as possible. According to the coalition agreement, the reporting obligation previously stipulated in the LkSG will be immediately abolished – i.e. before a new law comes into force. The government's aim is to relieve companies of burdens without losing sight of human rights and environmental standards.
The reform plan is based on the Omnibus Regulation planned by the EU Commission, which expressly provides for a simplified implementation of the European requirements.
Simplifications at EU level: The planned omnibus regulation
At a European level too, a development already indicates that companies will be relieved of burdens in the future: With the so-called Omnibus Regulation, the EU Commission intends to revise key provisions of the CSDDD. Among other things, it is planned that due diligence obligations will in future only relate to direct suppliers, while active measures will only be required for indirect partners in the event of concrete risks. Furthermore, measures are to be reviewed only every five years (instead of annually), and civil liability throughout Europe is no longer envisaged. The initial application of the directive will also be postponed to July 2028.
FAQ on the German Supply Chain Due Diligence Act
Conclusion: Take measures to comply with the Supply Chain Act now
Companies should view the Supply Chain Due Diligence Act not as an obligation, but as an opportunity for responsible corporate governance. Those who act now will reduce risks, secure their reputation, and strengthen their market position.
What we recommend to companies now:
- Carry out risk analyses
- Establish complaint procedures
- Document processes
Our tipWhen setting up or introducing a corresponding complaint procedure, ensure that the reporting channel meets both the requirements of the Supply Chain Due Diligence Act and the provisions on whistleblower protection.
We have summarised the to-dos for you in our LkSG checklist:
You want to learn more about how to use LegalTegrity for injuries within the area of responsibility of your suppliers, then Contact We look forward to seeing you!
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