The new German Supply Chain Due Diligence Act imposes new obligations on larger companies, which must, among other things, check their entire supply chain for violations of human rights and environmental concerns. Companies that are not yet directly covered by the scope of application—i.e., suppliers—are also indirectly affected, as they are subject to comparable obligations. This Insight provides an overview of the relevant topics and how suppliers can prepare themselves.

ESG (Environmental Social Governance) has already become an important topic in responsible corporate governance. Globally, there is a rapidly growing body of legislation that requires companies to take action and report on their ESG efforts comprehensively. Multinational corporations have a far-reaching impact on labor conditions in their supply chains. By conducting due diligence to uncover human rights abuses and environmental risks in supply chains, they can put pressure on their suppliers to improve their workers' working conditions and comply with environmental standards.

New obligations in Germany took effect on January 1, 2023

Many industrialized countries, including Germany, France and the Netherlands, have enacted laws requiring companies to comply with due diligence requirements when monitoring their supply chains, rather than relying on voluntary measures. The Supply Chain Due Diligence Act (“LkSG”) came into force in Germany on January 1, 2023. It initially applies directly only to...

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