FAQ on Germany‘s Supply Chain Due Diligence Act

FAQ on Germany‘s Supply Chain Due Diligence Act

FAQ on Germany‘s Supply Chain Due Diligence Act

Germany recently passed a supply chain law, one of many of these types of laws recently being passed by nations all over the world to try and combat various concerns, like human trafficking, that plague our consumer supply chain globally.

A German NGO, Initiative Lieferkettengesetz, has released an FAQ about the legislation. Below is an excerpt from the end on the legislation in and international context and what the international community can learn or improve on with this type of legislation. Read the full FAQ report here.


1. Can the LkSG serve as a model for EU legislation on supply chains? Various politicians, particularly from the CDU/CSU, have actively touted the LkSG since its adoption as a blueprint for the process of regulating sustainability-based due diligence obligations on the level of the EU. They seek thereby to assure that German enterprises are on an equal competitive footing with other companies in the EU internal market and, at the same time, to forestall any tightening of the obligations. From the perspective of the Initiative Lieferkettengesetz, the LkSG should not serve as blueprint for the EU process. The LkSG does contain numerous positive elements, which in our view should be incorporated into the EU legislation—these include, in particular, its precise description of the due diligence steps that companies should take, such as reviewing and adapting their own purchasing practices, but also the extensive powers granted to governmental authorities for enforcement. Nevertheless, the LkSG has significant shortcomings: it only applies to very large companies; its due diligence obligations with respect to indirect suppliers and relative to environmental protection are limited; and above all it lacks any provision for civil liability. In shaping the EU legislation, the EU Commission should not, therefore, reproduce the shortcomings of the LkSG. Instead, it should incorporate the most progressive elements from each of the supply chain due diligence acts hitherto adopted on the national level by EU member states. This would involve combining, e.g., the broader scope of application found in the Dutch Child Labor Due Diligence Act, the civil liability provisions of the French loi de vigilance, and the administrative enforcement powers granted under the LkSG. In the event that EU legislation, in accordance with these proposals, should adopt obligations that go beyond the LkSG, such stricter obligations would need to be incorporated into national law by the German legislature.

2. How does the LkSG stand relative to other international due diligence legislation? In recent years, a whole series of states have adopted legislation obligating their companies to exercise due diligence with regard to sustainability issues5—and the trend is growing. Many of the first-generation due diligence laws apply, however, only with respect to particular abuses along the supply chain, such as modern slavery or child labor, and/or are limited to imposing reporting requirements—and thus just one element of the due diligence obligations provided for under the UNGP. Thus, for instance, the 2015 UK Modern Slavery Act obligates companies to file a statement addressing how they deal with modern slavery in their supply chains. Companies are free, however, to state that they have taken no measures to combat slavery and will incur no legal consequences. France, in 2017, became the first country to require that companies comply with concrete, comprehensive due diligence obligations with regard to violations of human rights and environmental standards all along their supply chains (and not just report on such violations). Companies in France that disregard these duties will incur consequences: Civil society organizations are entitled to have the reports companies file reviewed by a court, and the Act also provides that, in the event damages arise, companies are subject to civil liability in suits filed by impacted parties. Like the French due diligence law, the LkSG provides for comprehensive due diligence obligations along the supply chain and consequences in the event of violations of such obligations. To that extent, the LkSG belongs to the younger generation of more advanced due diligence legislation. It is, however—in contrast to the claims put forward by certain legislators— not per se the world’s most ambitious act.

3. What is the relationship between the LkSG and the UNGP or the National Action Plans? Adoption of the UNGP in 2011 in many ways laid the cornerstone for all past and current processes aiming to anchor binding due diligence obligations in law. The concept of human rights due diligence for the supply and value chains was developed there. The UNGP moreover determined that states must prevent human rights abuses on the part of their enterprises and ensure that the rights of impacted parties are effectively upheld. The subsequently adopted National Action Plans (NAPs) constitute an important instrument in national implementation of the UNGP. They set forth what is required to happen on the national level in order to fulfil the principles of the UNGP – albeit very patchy and with varying quality and clarity. The steps proposed included conditioning the award of public procurement contracts or 5 See the study by Robert Grabosch, FES (in German), Gesetzliche Verpflichtungen zur Sorgfalt im weltweiten Vergleich, available for download at http://library.fes.de/pdf-files/iez/15675.pdf. 21 export credits on compliance with human rights standards, as well as measures intended to improve the access of impacted parties to complaint procedures. Nevertheless, the UNGP and NAPs are voluntary instruments. In the intervening years, these have proven inadequate to hold companies to compliance with human rights due diligence, as foreseen in the second pillar of the UNGP. Only a small fraction of enterprises fulfil due diligence obligations voluntarily. For this reason, statutory provisions are required, and these should apply to as large a number of enterprises as possible. Such legislation will not render the UNGP or NAPs obsolete. The UNGP have today gained international recognition as a ‟soft law” standard, which must be referred to in interpreting the duties of corporations, particularly where national law makes no provision at all or falls short of the international standards. Governments should continue to use NAPs to reach agreements relevant to the field of business and human rights, for instance to define more clearly the duties of states with regard to upholding human rights.

Read the full report here.

Learn more about Initiative Lieferkettengesetz here.