Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz - LkSG)

On the 1st of January 2023, the Supply Chain Sourcing Obligations Act (LkSG) will come into force. The LkSG aims to improve the protection of human rights in global supply chains. For companies, this legally means that adaptation strategies must be developed in the area of compliance.

The Supply Chain Sorgfaltsgesetz affects all companies, regardless of their legal form, that have

• have their head office, principal place of business, administrative headquarters, registered office or a branch office (§13d of the German Commercial Code) in Germany, and
• have at least 3000 employees in Germany (or posted abroad);
• from 1 January 2024: employ at least 1000 employees in Germany (or posted abroad).

For the companies concerned, this means in concrete terms that the so-called "due diligence obligations" must be fulfilled within the framework of the supply chain. The supply chain refers to all steps that are necessary to manufacture the products or provide the services of the company. The due diligence obligations include, among other things, the performance of regular risk analyses, the establishment of a risk management system, the anchoring of preventive and remedial measures, the establishment of complaints procedures, the definition of internal responsibilities, the documentation of measures and strategies, the submission of a policy statement as well as a report on the fulfilment of the due diligence obligations.

In the event of violations of the complex due diligence obligations, companies face fines of up to 8 million euros and, if necessary, exclusion from public tenders for up to three years. If it becomes known, there is also the threat of considerable damage to the company's image.
Our services:

BfU AG has been supporting companies in complying with legal requirements in their business organisation for four decades now. Our team of economists, lawyers, engineers and scientists will be happy to assist you with all elements such as:

• the establishment of an appropriate risk management system as well as the implementation of a risk analysis for the supply chains
• preparing and issuing a policy statement
• conducting training in the relevant business areas
• implementing a complaints procedure
• the preparation of the due diligence report

Sustainability Report / NF Report

The European Commission prepared a draft in April 2021, which also contains the amendment of the NFRD (Non-Financial Reporting Directive) adopted in 2014. This directive on reporting on the sustainability of companies (CSRD - Corporate-Sustainability-Reporting-Directive) massively expands the circle of companies with an obligation to prepare the so-called sustainability report.

So far, only public interest entities (including listed companies) are covered by the NFRD. The new CSRD is currently being revised by the Council of Europe and the European Parliament. If adopted as planned, all companies, regardless of their legal form or stock exchange listing, are expected to fall under the reporting obligation from the 2023 annual report onwards. From 2026 onwards, medium-sized and small public interest entities will also be subject to the reporting obligation.

Moreover, only those companies that fulfil two of the three criteria listed in the table will be subject to the reporting obligation (current, 2023, 2026).

In addition to this legal obligation, many companies have another need to prepare a sustainability report. Increasingly, major customers are demanding that their suppliers produce a sustainability report independently of any legal obligation. In the automotive industry in particular, expectations are currently rising sharply. Without a sustainability report, there is a risk of losing customer orders.

The requirements for non-financial reports are complex. They must be disclosed:

1.  Environmental concerns
2. Employee issues
3. Social issues
4. Respect for human rights
5. Combating corruption and bribery

Various, extensive standards and guidelines for compiling them make this process even more difficult, unsettle companies and cost a considerable amount of time. The EU is expected to publish its own standards in the course of the CSRD.

Our services:

We are happy to support you in:

• the legal determination of whether and to what extent your company is obliged to prepare a non-financial statement
• the classification of the most established standards (e.g. GRI) and identification of the areas relevant to your company
• the permanent updating and ongoing evaluation of new standards for the preparation of sustainability reports
• the collection and evaluation of data using predefined procedures
• the preparation of the NF Report / Sustainability Report in a scope that is individually tailored to your needs: from the statutory fulfilment of obligations to promotionally effective conceptualisation