The Supply Chain Sourcing Obligations Act (LkSG)

Implementation with the antares RiMIS® opportunity and risk management software

From January 01, 2023, corporate responsibility for human rights compliance along supply chains is to be regulated for the first time. This will be implemented with the Supply Chain Due Diligence Act (LkSG for short), which is closely linked organizationally to corporate risk management.

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What is the supply chain due diligence law?

The aim of the LkSG is to place greater emphasis on fairness and the protection of human rights in supply chains through corporate due diligence. Organizationally, supply chain monitoring is to go hand in hand with the monitoring of other risks.

This monitoring is carried out by the German Federal Office of Economics and Export Control, which has far-reaching powers such as entering business premises, inspecting documents, and much more.

Among other things, the following rights are to be better protected by the Supply Chain Due Diligence Act:

  • Freedom from slavery and forced labor
  • Protection of children and freedom from child labor
  • Freedom of association and right to collective bargaining
  • Protection from torture
  • Prohibition of disregarding the respective nationally applicable occupational health and safety obligations
  • Prohibition of withholding a fair wage; compliance with minimum wage regulations.
  • Prohibition of unequal treatment and discrimination of employees
  • Integrity of life and health

What are the new due diligence requirements?

Risk management

Risk management

risk analysis

risk analysis

Documentation

Documentation

prevention

prevention

complaint management

complaint management

What are the challenges for companies under the Supply Chain Due Diligence Act?

In the contribution from BR24 (Bayerischer Rundfunk), you can learn more about the thoughts and challenges of affected companies:
  • What does the LkSG konktet mean for my entire company?
  • What is the background behind this new law?
  • How will the new requirements affect my market position?
  • How does the LkSG affect different industries?
  • What are the consequences of a problem in the supply chain?
Through the video, you will get a holistic view of issues from the field.

Source: YouTube; Supply chain law: major challenge for companies | more/value | BR24

From when does the Supply Chain Sourcing Obligations Act apply?

The Supply Chain Due Diligence Act does not affect every company in Germany. There are also differences in timing for the introduction, depending on the size of the company:

  • from January 01, 2023 for companies with at least 3,000 employees
  • from January 01, 2024 for companies with at least 1,000 employees
In addition, the following points should be considered:
  • Company with its head office, principal place of business, administrative headquarters, registered office or branch office in Germany.
  • The due diligence obligations relate to the company's own business area, contractual partners and other (indirect) suppliers.
  • corporate responsibility along the entire supply chain.

What is the due diligence process for supply chains?

  1. Policy statement of the management on the human rights strategy (§ 6 para. 2 LkSG)
  2. Risk analysis (analysis, evaluation & testing) and designation of a responsible person to identify, minimize and avoid risks to people and the environment (§ 5 LkSG).
  3. Preventive measures (§ 6 para. 1,3,4 LkSG)
  4. Complaint procedure (§ 8 LkSG)
  5. Control
  6. Remedial measures in the event of identified violations of the law (§ 7 LkSG)
  7. Documentation and regular reporting on the fulfillment of due diligence obligations (§ 10 LkSG)

process: Supply Chain Act

Cover supply chain due diligence law via antares RiMIS®.

antares RiMIS® offers the possibility to optimally meet the new requirements of the LkSG. Through the risk management system, which has been established for years, the already identified risks as well as those still to come can be managed, evaluated and reduced or avoided with suitable measures. Likewise, the obligatory documentation and reporting can be implemented by means of report books and various individualizable evaluations.

Since antares RiMIS® is web-enabled, any number of persons can access the system decentrally within the scope of licensing and thus participate permanently in the process. This concerns in particular subcontractors, suppliers or other participants of the supply chain. They can enter relevant information directly into the company's internal system.

The intuitive interface structure and e-mail-supported workflow ensure a smooth and efficient risk management process. Self-explanatory cockpit views and graphics facilitate daily use and ensure fast results.

Short implementation times and the low maintenance effort guarantee a smooth use of antares RiMIS® as well as low operating costs with high investment security.

What we can do for you

FAQ

What exactly does the term "supply chain" mean?

A supply chain is a network of companies, subcontractors and suppliers which ensures the smooth transport of goods throughout the entire manufacturing process with the aid of modes and means of transport. The starting point of the supply chain is usually the procurement of raw materials, supplies and materials for the production of intermediate products.

A particular challenge is that these production factors have to be procured in part through imports from abroad and are therefore exposed to a specific fulfillment risk on the part of the supplier. Domestic suppliers are also subject to delivery risks that can make further processing more difficult and lead to operational disruptions. These risks can be minimized, for example, by redundancies or buffers.

By their very nature, disruptions in supply chains can cause a chain reaction in the form of a domino effect on downstream sales chains. In the supply chain, risks increase the longer the delivery routes and the number of links involved in the chain. Different modes of transport, additional handling processes with independent clearance risks, or administrative hurdles such as border clearance are much more susceptible to disruption than with national suppliers.

Does the annual report have to be published?

The report must be made publicly accessible (online) no later than four months after the end of the fiscal year from 2023/2024 and must be available for seven years. Company and business secrets must be duly protected. The reports will be submitted to the Federal Office of Economics and Export Control. An electronic process is being worked on to minimize the burden on companies.
With the following contents:

  • Has the company identified human rights and environmental risks, and if so, which ones?
  • What has the company done to fulfill its due diligence obligations?
  • How does the company evaluate the impact and effectiveness of the measures?
  • What conclusions does the company draw from the evaluation for future measures?

Do audits need to be performed on subcontractors?

The law does not specify in detail what evidence must be provided or agreed upon by a supplier in a specific case. Audits can be an indication of the fulfillment of expectations, provided that the audit in question takes into account the requirements of the LkSG.

What penalties can the company face in the event of a violation?

Up to EUR 8 million or up to 2% of global annual sales (sales-related penalties > EUR 400 million). Above a certain minimum amount, exclusion from public contracts is also possible.

From which version of antares RiMIS® is the module usable?

The module for the supply chain due diligence law can be used from version 6.3 of antares RiMIS®.

What is meant by the term "duty of care"?

Duty of care means that persons must perform or refrain from performing certain actions so that there is no risk of damage to other persons, assets, the environment or the goods themselves. For example, dangerous actions must be refrained from and measures to avert danger must be taken if an action poses potential dangers.

What is the questionnaire on the Supply Chain Act?

The questionnaire provides companies from a wide range of industries and sizes with a quick overview of the risk status of their supply chain. By responding to the questionnaire, companies receive an assessment of where they stand and what next steps are needed to further develop their supply chain with regard to the above criteria. The questionnaire serves as a rough guide, but does not correspond to a comprehensive analysis of the companies' supply chain procurement commitments.

The questionnaire can either be carried out as part of a self-assessment by the supplier or contractor or accompanied as part of a periodic audit. The results of this response are clearly presented and can also be cumulated (e.g. all suppliers from country X, all suppliers of a business unit, etc.).

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With the The Act on Corporate Due Diligence Obligations in Supply Chains, corporate responsibility for human rights compliance in supply chains is to be regulated for the first time. In our white paper you will find an overview around the topic Supply Chain Act and the implementation in antares RiMIS®.

Your request for the white paper "The Act on Corporate Due Diligence Obligations in <br>Supply Chains - Supply Chain Act"

Thank you for your interest in our white paper on the Supply Chain Due Diligence Act.

Our software solution is characterised by a wide range of applications, individual design options and simple user guidance. Further features and functions can be found in our whitepaper.

Do you have any questions about antares RiMIS® or the company? Don't hesitate and contact us at 07331/3076-0 or by e-mail at info@antares-is.de. We will get back to you as soon as possible.

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