Supply Chain Act

What is the Supply Chain Act (LkSG)?

The Supply Chain Act obliges companies to monitor and comply with human rights and environmental standards in their supply chains. Risks must be identified and minimised through due diligence checks. Violations can lead to legal consequences and claims for damages. The law aims to promote transparency, accountability and sustainable business practices.

What is it about?

The Supply Chain Act obliges companies to check the entire supply chain, from raw materials to the end product, for compliance with human rights and environmental standards. It places particular emphasis on the prevention of child labour, slavery and other human rights violations. Violations can have legal consequences. The aim is to increase transparency and responsibility in the supply chain and to strengthen human rights as well as environmental and health protection.

Who is affected?

The Supply Chain Act primarily affects large companies with international supply chains. However, smaller suppliers may also be affected if they are part of a larger company's supply chain. The law has an indirect impact on workers, consumers and local communities in the countries of production.

Human rights and supply chain law?

The Supply Chain Act aims to ensure compliance with human rights standards in companies' supply chains. It prohibits specific human rights violations such as child labour, slavery and forced labour and requires companies to actively identify and minimise these risks. Violations can have legal consequences. The law is therefore intended to strengthen human rights along the entire supply chain.

Binding criteria:

• Due diligence checks: Companies must carry out risk analyses to identify human rights violations and environmental damage in their supply chain.

• Preventive measures: Where risks are identified, companies must take preventative steps to minimise or eliminate them.

• Reporting: Companies are often obliged to publicly report on their due diligence measures and their results.

• Accountability: Companies can be held legally liable for breaches of the criteria set out in the law, which can lead to penalties or claims for damages.

• Compliance with international human rights standards: The law often refers to internationally recognised human rights conventions and requires compliance with them.

These criteria are intended to ensure that companies actively take responsibility for compliance with human rights and environmental standards in their supply chains.

Benefits of compliance with the Supply Chain Act?

Compliance with supply chain law brings several benefits, both for companies and for society:

• Reputational gain

• Risk reduction

• Market access

• Competitive advantage

• Employee satisfaction

• Long-term business relationships

• Social benefit

• Investor and stakeholder confidence

Compliance with supply chain law can therefore not only avoid legal consequences, but also offer numerous strategic and ethical advantages.

How does the audit work?

• Risk analysis: Identification of potential human rights and environmental risks in the supply chain.

• Documentation: Recording the risks identified and the measures taken.

• Preventive measures: Implementation of strategies to minimise risks.

• Monitoring: Continuous review of the supply chain and adaptation of measures.

• Reporting: Publication of reports on the audits and measures carried out.

• Accountability: Violations are followed by legal action, which can range from fines to compensation for damages.

The experts at BFMT have the necessary qualifications and expertise to provide you with the best possible support and auditing on this topic.