14 Things to Know About Germany’s Supply Chain Due Diligence Law

Authors: Stefan Schmierer, Managing Partner | Karl Borgschulze (Managing Director, Sustainable Management at Consulting Service International Ltd.)

The German Supply Chain Due Diligence Law (Lieferkettensorgfaltspflichtengesetz – “LkSG”) was enacted by the German Bundestag on 11 June 2021 and came into force on 1 January 2023. It obliges German‑based companies above a certain size to fulfil human rights and environmental obligations throughout their global supply chains.

From 1 January 2023, companies with at least 3,000 employees are covered, and from 1 January 2024 the threshold extends to companies with at least 1,000 employees. The law aims to ensure compliance with fundamental human rights standards, including the prohibition of forced labour and child labour.

1. The Law Applies in Particular to Suppliers Abroad

The law covers all steps necessary to manufacture a product or provide a service, both in Germany and abroad. It applies to a company’s own business activities and to direct and indirect suppliers, including those located outside Germany.

2. Staggered Scope of Application

The law applies in phases based on employee headcount in Germany, including certain temporary workers and employees posted abroad. Indirect suppliers are also covered regardless of their size.

3. Wide Definition Covering the Entire Supply Chain

The supply chain is broadly defined under section 2 paragraph 5 LkSG, covering everything from raw material extraction to final delivery to the end customer, including services, transport, storage, financial services, and legal advice.

4. Labour Protection, Anti‑Discrimination, and Freedom of Association

Protected legal positions are defined by reference to international conventions, including ILO conventions and UN human rights covenants, covering child labour, forced labour, discrimination, labour protection, and freedom of association.

5. Environmental and Climate Impacts Covered

Environmental risks are included where activities threaten soil, water, air, noise levels, water consumption, or human health, going beyond occupational health and safety to cover broader environmental and climate impacts.

6. Requirement to Issue a Policy Statement on Human Rights Strategy

Companies must implement effective risk management systems, conduct risk analyses, and issue a policy statement on human rights strategy, including expectations for employees and suppliers.

7. Codes of Conduct and Supplier Training

Preventive measures include codes of conduct, internal training, supplier selection procedures, and supplier training, with annual effectiveness reviews.

8. Timetable to Terminate or Minimise Viola

tions

Where violations occur, companies must take corrective action and, where necessary, develop a concrete timetable to minimise or end violations, with termination of business relationships as a last resort.

9. Complaints Procedures and Whistle‑Blower Engagement

Companies must establish complaints mechanisms allowing affected persons and whistle‑blowers to report risks and violations, which must be investigated and addressed.

10. Documentation and Reporting Obligations

Companies must document compliance internally for seven years and submit an annual report to BAFA, which is publicly accessible for the same period.

11. Regulatory Powers and Court Enforcement

BAFA has extensive powers to investigate, issue orders, and enforce compliance. Affected persons may assert rights before German courts.

12. Significant Fines and Exclusion from Public Tenders

Violations may result in fines of up to EUR 8 million, or up to 2% of global annual turnover for large companies, and exclusion from public tenders for up to three years.

13. Establishing Due Diligence Before Entry into Force

Companies must build awareness and implement due diligence systems in advance to meet compliance requirements.

14. Regional Challenges in Asian Supply Chains

Different regions pose different challenges. In Southeast Asia, enforcement gaps may exist despite formal legal frameworks, requiring companies to closely examine individual supply chain members.

How Ravenscroft & Schmierer Can Help

Compliance with the Germany supply chain due diligence law requires careful legal analysis, operational planning, and ongoing monitoring across global supply chains. Ravenscroft & Schmierer advises companies on LkSG compliance strategies, risk assessments, reporting obligations, and cross‑border supply chain governance.

If your business is affected by the LkSG, contact us to discuss your circumstances and available options.

FAQ: Germany’s Supply Chain Due Diligence Law

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For specific advice about your situation, please contact:

Stefan Schmierer 

Managing Partner

+852 2388 3899

sschmierer@rs-lawyers.com.hk