Webinar recording: Supply Chain Act in practice: How Schwäbische Werkzeugmaschinen fulfills the LkSG requirements for SMEs

‍

Basic requirements of the Supply Chain Act for SMEs

‍

‍

Since 2023, companies with over 3,000 employees have been obliged to comply with human rights and environmental due diligence obligations in their supply chains. From 2024, this obligation will already apply from 1000 employees. The aim of the law is to ensure that human rights are respected and environmental standards are adhered to along the supply chain.

Although the law is initially aimed at larger companies, SMEs are also feeling its effects through the so-called indirect obligations. This means that many companies are required to comply at an early stage due to customer requests or direct requirements from major customers.

‍

The law requires compliance with the following points:

• Declaration of principle: Companies must publicly demonstrate that they comply with human rights and environmental standards.
• Risk analysis and preventive measures: Regular analyses of the supply chain, followed by clear prevention measures.
• Complaints procedure: Establishment of a publicly accessible complaints channel.
• Documentation and reporting obligations: Verifiable and continuous documentation of the measures and annual reporting to the Federal Office of Economics and Export Control (BAFA).

‍

‍

Practical implementation with SW and Tacto

‍

The collaboration between SW and Tacto is an example of how a medium-sized company implements the Supply Chain Act strategically and operationally.

‍

1. create an organizational basis

‍

• Policy statement: A publicly accessible statement on human rights and environmental commitment is published on the company website. Tacto provides support with legally compliant templates.
• Complaints procedure: With the Whistleblower Protection Act (HinSchG), the complaints procedure for employees and suppliers is already integrated at SW and can be accessed via the company website.
• Define responsibilities: The management of risk management was defined in order to control the processes in accordance with the law and taking liability aspects into account.

‍

2. carrying out the risk analysis

‍

The risk analysis is the core of the due diligence obligations. All SW suppliers are assessed using a structured funnel model:

• Abstract risk analysis: Suppliers with a high risk potential are identified on the basis of three criteria - share of sales, country and sector risk.
• Specification of the analysis: Suppliers who are still considered potentially critical based on the initial analysis undergo a detailed review in which additional information, such as certificates and compliance documents, is requested and checked. This includes, for example, the ISO 14001 certificate, which confirms environmental standards.

‍

3. measures to minimize risk

‍

If the analysis shows that a supplier represents a risk, preventive measures are initiated. This is done via Tacto in the form of an automated workflow:

• Preventive measures: For example, suppliers receive SW's Code of Conduct to sign or must submit additional certificates.
• Concrete countermeasures: If a supplier repeatedly fails to meet the requirements, an audit is initiated. In the event of serious violations, such as evidence of child labor, SW has the option of terminating the business relationship.

‍

4. preparation of the BAFA report

Reporting to BAFA takes place annually and forms the core of the LKSG documentation. Tacto offers an automatic compilation of the recorded information and measures that are transferred to the report. In this way, SW ensures that all relevant measures are correctly documented and forwarded to BAFA in a legally compliant manner.

‍

Advantages of digital implementation with Tacto

‍

The complete mapping of processes in Tacto brings SW some decisive advantages:

• Central administration: All supplier data can be viewed centrally at any time, which significantly shortens the response time to legal requirements.
• Automated risk analyses: By continuously enriching and updating the database, Tacto performs automated risk analyses based on a broad pool of industry and country data.
• Documentation and verification: A central reporting system documents and structures all measures so that the company can also provide information quickly and transparently in the event of audits or queries.

‍

‍

Conclusion: Future-proof implementation of the Supply Chain Act in SMEs

‍

SW has consistently integrated the requirements of the LKSG into its purchasing and supplier processes, supported by the Tacto purchasing solution, which covers the entire supplier management and compliance process. The partnership demonstrates that even medium-sized companies can act efficiently and in compliance with regulations without losing sight of the operational tasks of purchasing. The close cooperation with Tacto also enables SW to react flexibly to new requirements, whether it is the European equivalent of the LKSG or other regulatory developments.

‍

‍

Your company and the Supply Chain Act

The Supply Chain Act requires companies to implement strategic and operational risk management that is also practicable and economically viable for SMEs. The digital support provided by tools such as Tacto enables efficient and transparent implementation of these requirements and allows us to look beyond current requirements to future regulations such as the Carbon Border Adjustment Mechanism (CBAM).

‍