Scope of applicationi The Due Diligence Act applies to companies, regardless of their legal form, where their head office, principal place of business, administrative headquarters, or their registered office is in Germany, and which usually employ at least 3,000 employees. Notably, entities that perform the administrative tasks of a regional authority are excluded from the Due Diligence Act unless they conduct entrepreneurial activity. The interpretation of the term 'usually', as outlined above, requires both a retrospective view and a prognosis of future personnel. The period considered should be both retrospective, as well as prospective, and must be long enough to ensure that short-term f
Insight
Germany: Overview of Supply Chain Due Diligence Act
June 17, 2022
Summary
The German Supply Chain Due Diligence Act (LkSG), effective from 1 January 2023, mandates businesses to adhere to human rights and environmental due diligence obligations. It applies to companies with at least 3,000 employees (lowering to 1,000 from 2024) based in Germany, excluding regional authorities unless entrepreneurial activities are conducted. The Act defines 'human rights' and 'human rights risk', and requires a risk management system, regular risk analyses, policy statements, preventive and corrective measures, complaint procedures, and due diligence for indirect suppliers. Documentation and annual reporting of compliance are obligatory, with penalties for non-compliance including fines up to €800,000 for individuals and up to 2% of annual turnover for large entities.