The Supply Chain Act: The whole company needs to be on board

Good intentions aren’t enough anymore: The Supply Chain Act (LkSG) has made voluntary commitments to environmental protection and human rights in Germany a legal requirement. What are companies doing about this? And what more do they need to do to comply with the legislation?

Only around a third of those surveyed as part of the INVERTO Risk Management Study said they were well prepared for the new legislation – this is a rather concerning statistic given that the new legislation came into force only eight to ten weeks’ later. The significant level of uncertainty cannot be explained solely by the complexity of the challenge.

BAFA only published practical recommendations in August 2022

The risk analysis guidance from the Federal Office of Economics and Export Control (BAFA) was only published in August 2022, when many companies had already begun their supply chain analyses. The rules on what annual reports should look like in the future and information on adequacy, effectiveness, and complaints procedures were only published in October. In terms of content, all those we interviewed complained that the information was not entirely clear and precise.

Inhaltlich waren die Informationen, so monierten alle Gesprächspartner:innen unserer Einzelinterviews, nicht in jedem Punkt eindeutig und präzise.

“We started the process at the end of 2021, when it was still not clear what BAFA wanted. We were trying to hit a moving target, so it was a challenge,” said a procurement manager from a media company. And a head of procurement at a software firm was also critical: “Unfortunately, the legislation leaves so much room for interpretation that I don’t know which resources to use to implement the Supply Chain Act and be compliant with it. There’s a great deal of room for interpretation.” “We have the feeling that there are still ambiguities on the legislative side as well,” said a procurement manager at a global energy technology manufacturer, summing up his skepticism.