The Supply Chain Due Diligence Act (LkSG) from the practical perspective of affected companies 

• Survey conducted by the Mannheim-based software company osapiens in cooperation with the German Federal Ministry for Economic Cooperation and Development (BMZ) 

• Majority of affected companies rate LkSG positively 

• Use of digital technologies is rapidly gaining in importance 

The German Supply Chain Due Diligence Act (LkSG), which comes into force in January 2023 and obliges companies to increase transparency along the supply chain, is viewed positively by the majority of German companies across all sectors. Companies with more than 3,000 employees and at least one location in Germany, which are currently in the decisive implementation phase, are investing the most in automation solutions, legal advice on supplier contracts and training for employees. 

These and other findings are the result of a survey of around 1,000 German companies conducted by the software company osapiens Services GmbH in cooperation with the German Federal Ministry for Economic Cooperation and Development (BMZ) since February 2022.  Almost three-quarters of respondents (73%) see the implementation of the law as an opportunity to enhance their company’s reputation, 60% primarily cite the positive impact on supplier management and for 58% of the companies surveyed, the creation of fair competitive conditions plays the most important role. 

“Even if companies rate the LkSG positively overall, they still face enormous challenges when it comes to internal implementation. In order to be able to support them in the future with concrete recommendations for action and needs-based offers, we wanted to know how companies assess the opportunities and risks, but above all the challenges”, said Alberto Zamora, CEO and co-founder of osapiens. 

Where do companies stand in terms of implementation? 
The companies were primarily asked about their risk assessment in relation to their own company and direct suppliers, existing or planned complaints management, suitable preventive and remedial measures for violations, planned forms of reporting and an assessment of planned expenses and budgets for the ongoing implementation of the Supply Chain Act. Even though some companies are already in the midst of implementing the required measures, the majority of those affected still need to be made aware of the associated challenges. Despite the realization that the use of digital technologies and thus the automation of relevant supply chain processes are extremely helpful for the implementation of the LkSG, companies across all industries are still at the very beginning in this area. 

“How are companies with 20,000 suppliers supposed to comply with the legal requirements of the LkSG without a digital solution, purely manually? For them, the Herculean task of individual risk analysis and continuous reporting is only possible with software support. Since 2021, we have been working with selected customers and the renowned law firm GvW Graf von Westphalen on a software solution specially tailored to the requirements of the LkSG. The results and findings of this survey will play a decisive role in the further development of the ‘osapiens HUB – supplier os.”Alberto Zamora, CEO and co-founder of osapiens 

Further tightening due to EU Supply Chain Directive from 2024 for the whole of Europe 
With the Supply Chain Duty of Care Act, the German government will legally oblige companies from January 2023 to bring transparency to their supply chains and, for example, to do their part to combat human rights violations and ensure environmental protection along the supply chain through individual risk analysis and extensive documentation requirements. From 2023, this will initially only affect companies with more than 3,000 employees. From 2024, companies with more than 1,000 employees will also have to comply with a comprehensive list of obligations. Particularly in view of the draft EU Supply Chain Directive (EU-SDC-D) presented by the EU Commission in February 2022, further tightening of supply chain monitoring is also expected at European level by 2024, meaning that companies must plan and take appropriate measures now. 

The results of the survey, which will run until the end of August 2022, will be presented by osapiens in cooperation with the BMZ on September 20, 2022 at the ‘LkSG Network Day’ in Mannheim. Interested representatives of companies from the fields of purchasing, compliance, sustainability and logistics are invited to exchange ideas with like-minded people and learn more about the legal issues and possible solutions relating to the LkSG.