Supply Chain- Act
Supply Chain- Act
Implementation of the Supply Chain Act (LkSG)
Implementation of the Supply Chain Act (LkSG)
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Effective and economical
supplier management
The Supply Chain Act has been passed!
The Supply Chain Act has been passed!
From 2023, supply chains from raw material extraction to delivery to end customers must be resilient to violations of human and environmental rights. For affected companies that need to manage such a complex task effectively, but also as economically as possible, there is no way around a thematically oriented, IT-supported compliance solution.
the supply chain act
the supply chain act
The Supply Chain Act (LkSG) creates clarity!
The Supply Chain Act (LkSG) creates clarity!
Since July 2021, discussions on legal requirements for human rights compliance in supply chains have ended. With the adoption of the “Act on Corporate Due Diligence in Supply Chains”, the German Bundestag determines,
what measures larger companies will have to take from 2023 to prevent violations of human rights and environmental obligations in their supply chains.
What are the points of the Supply Chain Act based on?
What are the points of the Supply Chain Act based on?
Pillars of the UN Guiding Principles on the Supply Chain Act (LkSG)
The Supply Chain Act is intended to enforce the UN Guiding Principles on Business and Human Rights, which were adopted by the UN Human Rights Council in 2011. These principles apply to all states and all business enterprises, regardless of their size, sector, location or ownership.
The total of 31 Guiding Principles are intended to help prevent or eliminate human rights violations in business. They are based on three pillars, which the German Federal Ministry for Economic Cooperation and Development describes as follows:
Every state is obliged to create the political and legal framework for
companies and investments to ensure the protection of human rights and
To ensure labor standards. These include, for example, environmental oversight
and a labor inspection.
Businesses should establish procedures to ensure their human rights
Establish due diligence procedures to ensure that their business activities have a negative impact on the environment.
avoid, reduce or compensate for human rights.
Persons whose human rights have been violated by companies must have effective
Remedy received. These include access to government and non-government
complaints offices and the possibility of taking legal action.
Germany is not alone: Regulations in other countries
Although Germany is leading the way with its national supply chain act, the clear goal is still to adopt an EU-wide regulation. It is likely that the German law will serve as a blueprint for the EU.
Similar regulations are already in force in other countries, although they are not as comprehensive as the German Supply Chain Act. In France, the “Loi de vigilance” has been in force since 2017, which penalizes serious violations of fundamental rights, health, personal safety and the environment that take place in the supply chains of large companies. In the Netherlands, the “Wet Zorgplicht Kinderarbeid” obliges companies to investigate supply chains of goods and services sold in the Netherlands with regard to possible child labor.
The compliance requirements of the Supply Chain Act (LkSG)
The compliance requirements of the Supply Chain Act (LKSG)
Who must deal with compliance in the supply chain?
Who must deal with compliance in the supply chain?
The requirements of the Supply Chain Act are mandatory for larger companies based in Germany. Specifically, the Supply Chain Act will apply from 01.01.2023
- Company based in Germany with min. 3000 workers, plus all employees of the company who are on assignment abroad, all temporary workers and employees of affiliated companies (in the case of corporate groups).
- All branches in Germany from 01.01.2024 (from 1000 employees). The above figure decreases for all!
How far does the Supply Chain Act go?
How far does the Supply Chain Compliance System go?
Why should companies under 1000 employees also pay attention to the Supply Chain Act?
Why should companies with less than 1000 employees also respect the Supply Chain Act?
Companies with fewer than 1,000 employees do not, legally speaking, have to deal with the Supply Chain Act (LkSG). Nevertheless, it would be advisable for all partners in the supply chain to comply with human rights, labor standards and environmental requirements.
- If the company itself is a supplier of a large company
- Avoidance of reputational damage
- Supply Chain Act applies to all industries!
These rules of the Supply Chain Act apply to everyone!
These rules of the Supply Chain Act apply to everyone!
The most important rules of the Supply Chain Act
The most important rules of the Supply Chain Act
The aim of the Supply Chain Act is to prevent human rights and environmental risks, to minimize them where necessary and to put an end to existing violations. The regulations of the Supply Chain Act basically apply to the entire supply chain;
starting with the extraction of raw materials through to delivery to the end customer.
Risk analysis
Defined procedures help in the proper and quick follow-up of whistleblower tips. The coordination of the measures lies with a single person.
Risk management
The establishment of a risk management system to prevent harmful effects on human rights and the environment or to remedy existing breaches of duty.
The establishment of a complaints procedure must be given.
Documentation and reporting
Ongoing documentation and annual reporting on management and measures taken because the Supply Chain Act makes the degree of responsibility dependent on the depth of the supply chain and the related possibility of exerting influence, companies are only required to take immediate and adequate action in the case of indirect Tier 2 suppliers as soon as they become aware in a substantiated manner of a possible breach of the requirements.
The Supply Chain Act and your company
What does this mean for your company?
What does this mean for your company?
For companies, analyzing and monitoring supply chains involves some effort.
Risk analysis example:
As part of the risk analysis, you must first determine which
suppliers themselves and which of their activities pose a risk to human rights compliance and where environmental violations are likely to occur. Some examples of potential risks include:
- Where are occupational health and safety rights at risk?
- Where might forced or child labor be taking place?
- Are there risks in the procurement of raw materials?
- Where do dangers hide with regard to environmental protection?
- Are there any risks associated with waste disposal?
- Do areas exist that are vulnerable to discrimination and unequal treatment of employees?
In addition to the processes in your own company and at your direct suppliers, you must also consider the processes at indirect suppliers if there are specific indications – this ranges from the procurement of raw materials and parts to transport and production.
Supply Chain Act? No problem!
Supply Chain Act? No problem!
IT-supported analysis and monitoring of the supply chain
bring advantages!
IT-supported analysis and monitoring of the supply chain bring benefits!
As the examples just mentioned show, supply chain analysis, management, monitoring, documentation and reporting is a very costly and complex process. Manual work steps, Excel lists, individually written mails and protocols in Word are only of limited help here. Rather, end-to-end digitization in conjunction with a workflow-supported IT solution is the order of the day. This is the only way to achieve efficient data management and a high degree of automation.
An example from the business partner due diligence, which is part of a digital supply chain compliance solution, shows the enormous savings potential of IT-supported processes: If an employee manages and monitors the business partners manually, he is already fully occupied with the handling of 50 critical business partners. With an IT-supported business partner check with automated processes, the workload can be significantly reduced and the quality improved.
The Supply Chain Compliance System
What does the Supply Chain Compliance System offer?
What does the Supply Chain Compliance System offer?
Compliance Solutions provides the Supply Chain Compliance System, a holistic supply chain risk management solution that meets the requirements of the Supply Chain Act. The system identifies risks along the supply chains with a high degree of automation.
In doing so, it recognizes and evaluates the potential for damage at an early stage so that you can initiate appropriate measures.
The Supply Chain Compliance System from Compliance Solutions guides you through the necessary steps for risk analysis and reporting in a guided process with defined roles in an audit-proof manner:
- Upfront Risk Assessment
- Detailed examination of suppliers including survey
- Sanctions list check (PEP, Black, Watch lists, Adverse media)
- Structured internet research about the suppliers
- Automated risk identification and setting of red flags
- Supplier risk assessment
- Permanent screening and monitoring to identify new risks
- Compliance audits
- BI & Reporting
Contact
Individual Advice on the Supply Chain Compliance System
Individual Advice on the Supply Chain Compliance System
Are you interested in our Supply Chain Compliance System? Please write to us, our compliance experts will be happy to advise you.