EU: No more shifting of LKSG obligations to suppliers

BAFA publishes handout on supply chain cooperation

In general, small and medium-sized enterprises (SMEs) are not (yet) directly affected by the statutory due diligence requirements of the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz - LKSG). However, an SME can still come into contact with the requirements of the law as a "direct supplier" if it supplies products to another company that is itself subject to the LKSG obligations. This is because the obligated company must include direct suppliers with whom it suspects a risk in its concrete risk analysis and, if necessary, in preventive and remedial measures as well as in the establishment of its complaints procedure.

In practice, this has led to blanket contractual clauses such as "The supplier assures that all relevant human rights and environmental due diligence obligations of the LKSG are complied with in its area of responsibility" being passed on to SMEs.

The responsible Federal Office of Economics and Export Control (BAFA) has now countered this practice with a handout and a FAQ catalog, and has fleshed out the possible cooperation in the supply chain in more detail.

The LKSG does not oblige SMEs

  • carry out their own risk analysis in relation to their supply chain;
  • to check themselves which preventive and remedial measures they should implement in relation to their supply chain
  • to set up their own complaints procedure
  • submit reports to BAFA or cooperate in doing so.

BAFA also clarified in this context that it cannot and will not inspect SMEs for this or impose sanctions such as fines.

Instead, the obligated company must first conduct a risk analysis itself. Only when an actual risk is identified at a supplier can the supplier be involved in preventive and remedial measures. Consequently, suppliers will in future be able to reject demands for blanket implementation of the LKSG requirements, for example if they are asked to carry out a risk analysis or set up their own complaints procedure.

However, it remains to be seen whether this can actually always be implemented in practice ("David against Goliath").


Do you have any questions? Feel free to write to us!

Published on 22.09.2023
Category: Fokus Industry, Fokus Electrical and Wireless, Compliance

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