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Homepage Legislation German Supply Chain Act (LkSG) Background and development

Background and development

The Act on Corporate Due Diligence Obligations in Supply Chains gives enterprises clear guidance and legal certainty on how to respect human rights. For the first time, binding rules are laid down regarding the due diligence obligations that enterprises along the supply chain must comply with. At the same time, the Act strengthens the protection of human rights around the world and makes it easier for those affected to enforce their rights.

Sustainable and responsible corporate governance in terms of human rights and environmental policy must become the standard – the Supply Chain Act is an important milestone on this journey.

The NAP as the foundation for the Supply Chain Act

The foundation for the Supply Chain Act has already been laid in recent years. In 2016, the Federal Government launched the National Action Plan for Business and Human Rights (Nationaler Aktionsplan Wirtschaft und Menschenrechte, NAP) to contribute to more socially just globalisation together with enterprises and help protect human rights around the world. The NAP is based on the United Nations Guiding Principles on Business and Human Rights. In addition to the state’s protection obligation as well as judicial and extrajudicial remedies, corporate responsibility lies at the centre of the plan. The Federal Government supports enterprises in fulfilling this responsibility. In cooperation with industry sectors that face particular human rights risks, specific guidelines were developed for use in practice, for example, free advice from a help desk for business and human rights and guidelines within the framework of the sectoral dialogues.

However, a survey of businesses conducted by the Federal Government (NAP monitoring) revealed that only about one fifth of all German-based enterprises with more than 500 employees currently sufficiently meet their human rights-related due diligence obligations along their supply chains. This shows that a voluntary commitment does not suffice. In the coalition agreement of 2018, the Federal Government agreed to take legislative action at a national level in this case and, at the same time, to work towards binding rules at a European level. In addition to the German supply chain legislation, which was promulgated in the Federal Law Gazette in July 2022 and came into force on 1 January 2023, the Federal Goverment supports the objectives of the European Supply Chain Directive and its implementation into national law.

The Federal Government is currently revising and updating the National Action Plan in close collaboration with many social groups. As part of this review, the Act on Corporate Due Diligence Obligations in Supply Chains will be seamlessly integrated into the broad overall strategy on business and human rights. Unlike the Act, the NAP is addressed to all enterprises based in Germany. In the action plan, the Federal Government has formulated its expectation that companies will comply with the due diligence obligations it sets out.

One focus of the revised NAP will be to support enterprises in implementing their due diligence obligations. Offers to that effect made by the Federal Government and other relevant actors will be collected and made public.

Here you will find more information about the NAP.

Assessing the effectiveness of the Act

The effect of the Act will be evaluated in due time.