The Supply Chain Sourcing Obligations Act (LkSG)

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.).