Article: The German Supply Chain Law: A First Step Towards More Corporate Sustainability

Abstract

The German supply chain law ( Lieferkettensorgfaltspflichtengesetz, abbreviated: LkSG) which enters into force on 1 January 2023 is part of the developing legal framework for human rights in global supply chains. Like the French vigilance law, it represents a new generation of supply chain laws which impose mandatory human rights due diligence obligations. The LkSG requires enterprises to exercise a number of due diligence obligations – from conducting risk analysis to undertaking preventive measures or remedial actions. The law is based on public enforcement via a competent authority, the Federal Office for Economic Affairs and Export Control (BAFA). The BAFA monitors and enforces compliance with the due diligence obligations. Non-compliant enterprises can be fined with up to 800,000 Euros and, in some cases, up to 2% of the annual turnover. Whilst the LkSG is an important step towards achieving greater corporate sustainability, it also has limitations. It was a political compromise and, as such, it does not include a new civil liability for non-compliance. Moreover, by default, it only applies to the enterprise’s own business area and its direct suppliers, whereas indirect suppliers are only included where the enterprise has substantiated knowledge that an obligation has been violated. Supply chain law, Germany, Lieferkettensorgfaltspflichtengesetz, LkSG, business, human rights, home state laws, human rights due diligence, UN Guiding Principles