Editor’s Pick: The German Supply Chain Due Diligence Act

Note: Today’s post is part of our “Editor’s Pick” series where we highlight recent posts published by our sponsors that provide practical knowledge and advice on timely and important supply chain and logistics topics. In this recent post from SAP’s blog, Xuan-Yen To highlights the Supply Chain Due Diligence Act (LkSG) passed in Germany (which goes into effect on January 1, 2023) aimed at “improving and protecting the environment and human rights along the global supply chain.” This is another example of why the definition of supply chain visibility needs to go beyond the status of orders, shipments, and inventory to also include having timely, accurate, and complete visibility to labor, safety, environmental, and legal practices across the entire supply chain.

In Germany, many of the products we buy were produced in continents such as Asia (clothing), Africa (chocolate), or South America (coffee). To better protect the rights of people there from exploitation, the German Bundestag has passed and launched a new law: the Supply Chain Due Diligence Act (LkSG).

On January 1st, 2023, the new LkSG will come into force in Germany and will be binding for all companies based in Germany.

The aim of this new law is to improve and protect the environment and human rights along the global supply chain by ensuring compliance with basic human rights standards and prohibiting child and forced labor.

And although many companies are already trying to bring more transparency into their supply chain and pass on some of these conditions to their suppliers, it remains a major challenge for most companies to make their supply chain transparent as quickly as possible.

A violation of the LkSG can result in a hefty fine. This can be up to 8 million euros or two percent of average annual sales if annual sales exceed 400 million euros.

Why is this important to know?

Read More at SAP’s Blog