The Supply Chain Due Diligence Act and its implementation

The passing of the German Supply Chain Due Diligence Act in the summer of 2021 was an important step towards establishing clearly defined human rights due diligence obligations for companies. Nevertheless, many questions remain unanswered regarding the implementation of the Supply Chain Due Diligence Act (LkSG), as it is known in full. 

The Foundation will support the transition phase leading up to the Act’s entry into force through a new priority area comprising several projects. Companies are invited to take part. Since 2019, the Foundation had formulated common core concerns through the so-called ‘Ruggie Roundtable’ (named after John Ruggie, author of the UN Guiding Principles), which it initiated, with the participation of German corporations, SMEs and NGOs. In this, the signatories highlighted the challenges posed by an unclear and fragmented legal landscape, expressed the desire for a European level playing field and called for a political response.

Dialogue and cooperation as an essential part of the Foundation’s work

Cooperation with businesses, non-governmental organisations and political actors, as took place in the Ruggie Roundtable, is an essential component of the foundation’s work. Dialogue formats such as Industrial Dialogues, multi-stakeholder partnerships and other cross-sectoral initiatives make an important contribution to finding new solutions and, through a joint approach, enhancing impact on the ground. At the same time, they are no substitute for a political framework, such as that now established by the Supply Chain Due Diligence Act.

Support during implementation

Whilst greater legal certainty is in sight at the start of the transition and implementation phase of the Supply Chain Due Diligence Act, much remains unclear. Until the Act comes into force and beyond, the Foundation will support economic actors in embedding the national legislation, both through empirical surveys and studies and through concrete corporate case studies. The starting point for this work will be a stock-taking exercise: what processes are already in place, and how is the issue of human rights embedded within companies? How are companies responding to the new Act?

In search of concrete answers

The aim is to produce a systematic description of both large corporations and small and medium-sized enterprises, enabling us to draw conclusions about the consequences of the Supply Chain Due Diligence Act even during the transitional phase: How is the Act already having an impact before it comes into force? What role do reputational issues play? What driving factors exist apart from civil society? Does the Supply Chain Due Diligence Act actually contribute to greater clarity and legal and operational certainty, as confirmed by its initiators and called for in the core concerns of the Ruggie Roundtable? How are resources being deployed within companies?  

The Supply Chain Due Diligence Act may give rise to potentially paradoxical requirements. We wish to contribute to finding, together with companies, legally compliant courses of action that do not run counter to the Act’s objectives. Not least, we intend to use our findings to draw conclusions for the forthcoming European regulation.

Key focus areas

• Reputation
• Organisation and commissioning
• Costs and resources
• Risk analysis
• Clarity and legal certainty
• EU level

Methods to be applied

• Case studies involving companies from the Ruggie Roundtable
• Empirical survey of small and medium-sized enterprises
• Monitoring of consultancy and service providers regarding HRDD offerings
• Ruggie Roundtable with ongoing reflection

Planned outcomes

• Publication of interim findings – particularly with regard to the systematic evaluation of consultancy and service offerings
• Interim findings in the form of a paper addressing the question: “How are companies positioned with regard to the Supply Chain Due Diligence Act? How are they preparing for it?”

Results

Systematic analysis of case studies on the implementation of the Supply Chain Due Diligence Act in companies directly affected by the Act

Study – Implementation of the Supply Chain Due Diligence Act in small and medium-sized enterprises

Global textile production processes