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What is the German Supply Chain Due Diligence Act?

The German supply chain act (titled Act on Corporate Due Diligence Obligations in Supply Chains; in German, Lieferkettensorgfaltspflichtengesetz, or LkSG) is an effort on the part of the German federal government to protect and strengthen human rights and the environment through the supply chains of companies operating in Germany.

The act obliges all companies operating in Germany in 2023 with 3,000 or more employees to implement a supplier risk management system. In 2024, the act will apply to companies operating with 1,000 or more employees. 

The risk management system must help assess, mitigate, and monitor human rights and environmental risks in the company’s supply chain. Reporting to the German government will be required no later than April of 2024.

Compliance with LkSG will require:

  • Establishing a risk management system

  • Defining where responsibility for compliance lies within the company

  • Issuing a policy statement

  • Performing regular risk analyses

  • Establishing preventive measures within the company’s own field of business and in relation to any direct suppliers

  • Taking remedial measures

  • Establishing a complaints procedure

  • Implementing due diligence obligations with respect to risks at indirect suppliers

  • Documentation and reporting

It’s important to note that the cost of not complying could be significant: penalties and fines up to 2% of annual revenues and exclusion from public tenders for up to three years. Not to mention the risk of damage to your brand and resulting revenue loss.

How SAP Can Help

SAP is committed to helping companies comply with LkSG with SAP Ariba solutions and SAP Business Network. SAP Ariba Supplier Risk addresses the act’s specific requirements.

We also recommend that you explore the capabilities of SAP Ariba Lifecycle and Performance to help scale compliance across your supply base.

SAP Ariba Supplier Risk

Make risk assessment and due diligence part of the source-to-pay process, and tailor risk views and alerts to your business, to each supplier relationship, and to your role. Enabled by SAP Business Network, SAP Ariba Supplier Risk helps you:

  • Assess: Perform risk due diligence about targeted suppliers in your supply base, segmenting by country, commodity, etc.
  • Mitigate: Drive collaborative risk disposition and remediation to minimize risk impact to your business
  • Monitor: Rely on continuous, proactive risk monitoring and alerts, plus ongoing compliance checks

This process produces reporting data that can meet LkSG requirements.

Learn more about risk management
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SAP Ariba Supplier Lifecycle and Performance

Integrate supplier lifecycle management with your procurement processes to drive spend to preferred suppliers and scale compliance for your entire supply base. SAP Supplier Lifecycle and Performance enables:

  • Central supplier repository for native integration into SAP ERP

  • Scalable and rapid supplier onboarding

  • Region- and category-specific supplier qualification and segmentation

  • Compliance enforcement with source-to-pay process

  • Self-service reporting by suppliers via SAP Business Network

  • Framework and visibility to support sustainability, diversity, and other corporate responsibility programs

Learn more about supply lifecycle management
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Planned Product Enhancements

While SAP Ariba Supplier Risk can help companies achieve LkSG compliance today, the solution is continually enhanced to meet evolving legal requirements and respond to customer needs and feedback. For example, forthcoming enhancements include integration with an SAP Business Network supplier self-assessment and capabilities to enable collaboration on findings to manage measures and complaints.

Visit the SAP Roadmap Explorer to stay abreast of planned product enhancements.

See SAP Road Map
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