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GAN Integrity is how compliance teams get the tools and expertise to stay ahead of ESG risk. With less effort but more reach, you finally get a better way to do your good work.

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See everything – Gain a comprehensive view of the upstream and downstream ESG risks associated with your extended supply chain.

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Understanding the German Supply Chain Act

960_Reg_German Supply Chain Act-_German Supply Chain Act-

The German Supply Chain Act came into effect in January 2023 and represents a significant milestone in promoting responsible and ethical practices within global supply chains. It mandates that companies operating in Germany with at least 3,000 employees (and from 2024, those with 1,000 employees) must exercise due diligence to prevent human rights violations and environmental damage throughout their entire supply chain.

Companies are required to implement and document measures to identify, assess, and mitigate risks associated with human rights abuses and environmental degradation.

The Importance of Complying With the German Supply Chain Act

Compliance with the act cannot be overstated for companies seeking to operate within the German market. Companies found in violation of the Act face significant penalties, with fines up to €8 million or, for larger companies, up to 2% of their annual global turnover. 

Beyond financial penalties, non-compliance can lead to exclusion from public procurement contracts in Germany, a substantial setback for those relying on government contracts. This level of accountability places a considerable emphasis on risk-based monitoring and enforcement of supply chain practices, highlighting the shift towards a more sustainable and ethically responsible global trade framework.

Key Requirements of the German Supply Chain Act

The act outlines steps organizations should take to meet the due diligence obligations across your supply chain. These include:

Risk Management System: Companies must establish a risk management system to identify, assess, and address human rights and environmental risks in their supply chains. This includes regular risk analysis and the implementation of appropriate preventive and remedial measures.

Policy Statement: Companies must issue a policy statement outlining their commitment to human rights and environmental due diligence, detailing their approach to preventing and mitigating risks.

Preventive Measures: Companies are required to implement measures to prevent or minimize identified risks. This includes integrating compliance clauses into supplier contracts and conducting supplier audits.

Remedial Actions: If risks or violations are identified, companies must take appropriate remedial actions, which could include engaging with suppliers to address issues or terminating business relationships as a last resort.

Grievance Mechanism: Companies must establish an accessible grievance mechanism to allow individuals to report human rights or environmental violations. This system should ensure the protection of whistleblowers and facilitate the resolution of complaints.

Documentation and Reporting: Companies must document and publicly report on their due diligence activities annually. This report should include identified risks, measures taken, and the effectiveness of these measures.

In-House Responsibility: Designate a responsible person or department within the company to oversee compliance with the LkSG and ensure ongoing monitoring and improvement of the due diligence processes.

GAN Integrity for the German Supply Chain Act

GAN Integrity’s platform is designed to support companies in maintaining robust ESG compliance programs that meet LkSG requirements.

Supply Chain Due Diligence Policy Management Third-Party Risk Management Disclosure Management Reporting and Documentation

Supply Chain Due Diligence

Enhance supply chain risk management by consolidating processes, identifying and mitigating risks, and integrating data from various risk intelligence and business systems. Capabilities include:

  • Automated risk assessments and continuous monitoring: Monitor suppliers continuously for adverse media, sanctions lists, PEP lists, forced labor, and ESG (Environmental, Social, and Governance) issues.
  • High-risk supplier identification and management: Identify high-risk suppliers, manage them effectively, and track actions and mitigations to ensure compliance.
  • Integrated due diligence assessments: Perform thorough due diligence across your business operations and workflows for seamless integration and enhanced efficiency.
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GAN Integrity Supply Chain Due Diligence

Recent Resources

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What is the German Supply Chain Due Diligence Act? — GAN Integrity

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Frequently Asked Questions

What are the requirements for LKSG?
The German Supply Due Diligence Chain Act (LKSG) requires companies operating in Germany with at least 3,000 employees (reducing to 1,000 employees from 2024) to implement due diligence measures to prevent human rights violations and environmental damage throughout their entire supply chain. These companies must identify, assess, and mitigate risks associated with human rights abuses and environmental degradation, as well as document their efforts to comply with the Act's requirements.
The German Supply Chain Due Diligence Act (LKSG) is a law that came into effect in January 2023, mandating companies operating in Germany with at least 3,000 employees (and from 2024, those with 1,000 employees) to exercise due diligence in preventing human rights violations and environmental damage throughout their entire supply chain. This legislation requires companies to implement and document measures to identify, assess, and mitigate risks associated with human rights abuses and environmental degradation, with non-compliance potentially resulting in significant penalties, including fines up to €8 million or 2% of annual global turnover for larger companies.

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