What is the Supply Chain Due Diligence Act (LkSG) and why is it so important?
The Supply Chain Due Diligence Act (LkSG) is of central importance for the SAP environment, as it requires companies to uphold human rights and environmental standards in their global supply chains. It mandates the identification and mitigation of risks as well as reporting on them. Compliance with this law not only contributes to legal certainty but also strengthens brand trust and promotes sustainable business practices.

Core Contents of the Supply Chain Act
The LkSG obliges companies to fulfill due diligence obligations in their supply chains to prevent serious abuses such as child labor, forced labor, and environmental destruction. The central requirements of the law include:

• Risk Analysis: Companies are encouraged to regularly identify potential risks to human rights and the environment in their supply chains.

• Preventive Measures: >A risk management system must be established and implemented, focused on avoiding or minimizing identified risks.

• Remedial Measures: >In case of violations of the established due diligence obligations, immediate action must be taken.

• Transparency and Reporting: >Companies are required to report annually on compliance with their due diligence obligations and make the results publicly accessible.

Obligated Parties under the Supply Chain Due Diligence Act
The LkSG applies to larger companies with the following criteria:

• Large Companies: >Firms with at least 3,000 employees in Germany are required to meet the law's requirements. Starting in 2024, this threshold will be lowered to companies with at least 1,000 employees.

• Cross-Industry Application: >The law is industry-independent and therefore affects companies from all sectors that exceed the employee limit.

• International Supply Chains: >Companies with significant international supply chains must align not only their own business practices but also those of their direct and indirect suppliers with the requirements of the LkSG.

• Contract Partners: >Companies are also required to demand compliance with due diligence obligations from their contract partners. This may require reviewing and adjusting existing contracts to ensure compliance.

Obligated Companies under the LkSG
Companies that must implement the LkSG are those that meet the criteria mentioned above. This includes both domestic companies and foreign companies with significant business operations in Germany.

The LkSG in SAP
The Supply Chain Due Diligence Act (LkSG) poses specific challenges for companies using SAP systems:

• Data Integration: SAP systems must be able to integrate and record data from various parts of the supply chain. This concerns information about suppliers, sub-suppliers, and compliance with environmental and human rights standards.

• Compliance Reporting: Companies must be able to create verifiable compliance reports using SAP that include all required information according to the LkSG.

• Risk Management: SAP systems should be used to identify and manage risks in the supply chain, especially those concerning human rights and environmental standards.

• Process Automation: SAP can assist in automating monitoring and compliance processes to ensure continuous adherence to the LkSG. These requirements often mean additional adjustments and investments in SAP systems to meet legal standards.

Conclusion
The Supply Chain Due Diligence Act (LkSG) marks an important step toward a more responsible global economy. With the introduction of this law, companies are expected not only to scrutinize their direct business relationships but also their entire supply chains. This includes monitoring and improving working conditions, ensuring human rights compliance, and protecting the environment. The LkSG helps ensure that companies play a more active role in combating abuses such as exploitation and environmental destruction. For companies, this means additional requirements and potentially higher costs, but it also offers the opportunity to strengthen consumer trust and position their brand as responsible and sustainable. Ultimately, the LkSG demonstrates that economic success and ethical behavior can go hand in hand, setting new standards for global business practices.