Supply Chain Due Diligence Act (LkSG) & EU Supply Chain Directive (CSDDD)

Strengthening human rights along the value chain

Corporate responsibility does not end at the factory gate. With the Supply Chain Due Diligence Act (LkSG), the German government has created an instrument to constantly monitor social, environmental and legal standards in its own global supply chain and take action if necessary. In addition, the EU is planning a supply chain law (Corporate Sustainability Due Diligence Directive – CSDDD or CS3D), which will cover even more far-reaching responsibilities and topics. The DFGE helps you to understand and implement the requirements of the LkSG and the CSDDD.

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Key facts

about the legal plans

LkSG

  • Applies since 2023 for companies with more than 3,000 employees in Germany, from 2024 for companies with more than 1,000 employees in Germany
  • Companies’ due diligence obligations are extended to their entire supply chain
  • Companies must take action if there are clear indications of human rights violations in the supply chain

CSDDD

  • Applies from July 2027 for EU companies with >5,000 employees and €1.5 billion turnover, from 2028 for >3,000 employees and €900 million turnover, from 2029 for >1,000 employees and €450 million turnover.
  • EU member states must transpose the directive into national law by July 2026, in Germany probably by amending the LkSG.
  • The due diligence obligations cover the entire value chain.
  • Companies must identify, prevent and minimize negative impacts on human rights and the environment and initiate remedial measures.
  • Large companies must develop a climate plan to bring their business model in line with the 1.5 degree target of the Paris Agreement.

Dynamic adaptation of EU regulations

in the area of sustainability reporting

  • The European Commission plans to combine various existing and future ESG reporting obligations (CSRD, EU Taxonomy, CSDDD) in order to reduce the bureaucratic burden on companies
  • In Germany, the LkSG is expected to be amended accordingly or replaced by the new CSDDD regulations. Until then, companies must continue to comply with the existing requirements of the LkSG
  • In future, companies will have the choice of reporting in accordance with the LkSG or European sustainability reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD)
  • With DFGE at your side, you can navigate safely through the constantly changing regulatory landscape of sustainability reporting

Identify and analyze risks

Impact of activities on human rights +
Analysis, assessment, prioritization of relevant risk areas +
No separate assessment of environmental protection

Take action

Prevent, minimize and eliminate negative effects

Check effectiveness

Control of the measures

Establishment of a complaints mechanism

Internally or externally

Transparent and public reporting

On a yearly basis

What does this mean for companies?

Internal & External

Implementation in own business area:

  • Establish risk management
  • Conduct annual risk analysis to identify human rights and environmental risks
  • Adopt a policy statement on respect for human rights
  • Establish a grievance mechanism
  • Take preventive and remedial measures to avert potential negative impacts on human rights
  • Report transparently and publicly: Report on actual and potential adverse impacts and the company’s risk management

Implementation at the direct supplier:

  • Conduct annual risk analysis to identify human rights and environmental risks
  • Take preventive and remedial measures to avert potential negative impacts on human rights

Implementation at the indirect supplier:

  • Only event-related due diligence obligations and only if the company becomes aware of a possible violation. Then the company must:
    • Carry out a risk analysis
  • Implement a concept for minimization and avoidance
    • Implement preventive measures

How can DFGE help?

The DFGE helps you to understand and implement the requirements of the LkSG and the CSDDD

Determining the status quo

Where does your company stand today in terms of sustainability? What measures have you already implemented? Where are the links between your business activities and human rights? Which regulations and standards are relevant for you? How can synergy effects between LkSG, CSDDD, CSRD, EU taxonomy and climate strategy be utilized??

Risk analysis workshop

What requirements does the LkSG place on risk analysis? How do you identify high-risk suppliers? How do you carry out an abstract and a concrete risk analysis? Which tools help to carry out the risk analysis?

Creation of a climate transition plan

How does your company plan to reduce its greenhouse gas emissions in line with the goals of the Paris Climate Agreement and what specific measures are planned to achieve this? To what extent is your business model compatible with the transition to a sustainable economy? Further information on the Climate Transition Plan can be found here.

Support with CSR reporting obligations

DFGE helps you to build up basic knowledge for various CSR reporting obligations, to record and validate the essential information and can support you at every step of your CSR management journey.

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Your Advantages

Why the DFGE on the topic of LkSG & CSDDD?

  • Structured approach to identify the focus topics for you step-by-step
  • Many years of experience in sustainability reporting in accordance with internationally recognized standards and guidelines such as CSRD, SFRD and GRI
  • Many years of expertise in the area of supply chain, supply chain law and EU directives
  • Experts in ESG strategy & governance
  • Help with questions about application, scope and issues such as liability

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