The Supply Chain Act has been in force since January 1, 2023. Initially, there were still many unanswered questions regarding the specific implementation of the requirements. Now the BAFA (Federal Office of Economics and Export Control) is increasingly providing concrete guidelines and assistance in the form of handouts. So far, the guidelines on risk analysis, the complaints procedure and the principle of appropriateness and effectiveness have been published. These are intended to help companies to transform the abstract legal text into clear implementation measures by providing guidance.

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Appropriateness & effectiveness

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The principle of appropriateness sets the overarching framework for the implementation of the due diligence obligations established by the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz - LkSG). Companies are therefore required to introduce, monitor and further develop appropriate and effective processes to implement their due diligence obligations. The principle of effectiveness, on the other hand, serves the fundamental objective of the law to improve the protection of individual human rights, the international human rights situation and the protection of the environment. The principles of appropriateness and effectiveness are closely related, as an appropriate selection can only be made from effective measures. By reviewing effectiveness and appropriateness, companies can deploy their resources more effectively.

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Risk analysis

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Section 4 of the Supply Chain Act requires companies to establish appropriate and effective risk management in order to identify, prevent, minimize or eliminate human rights or environmental risks or violations. In doing so, companies should follow a risk-based approach. This means that they should deploy their resources in a targeted manner and address the most important and urgent issues first. It is a fundamental component of risk management and helps companies to use their resources as wisely as possible.

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Complaints procedure

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Appropriate complaints procedures are a core element of the due diligence obligations established by the LkSG. According to Sections 8 and 9 of the Act, every company must have a complaints procedure in place through which internal and external persons can inform the company of human rights or environmental risks or violations in its own business operations and in the supply chain. Companies can use an internal procedure for this purpose, participate in an equivalent external procedure or combine internal and external complaints procedures.

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Conclusion: Practical support for SMEs

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The BAFA handouts offer companies, especially SMEs, valuable guidance on how to efficiently implement the requirements of the LkSG. With the practical guidelines on appropriateness, risk analysis and the complaints procedure, companies can better comply with the legal requirements and at the same time make their supply chains sustainable.

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For detailed information on the implementation of the LkSG and how to use the BAFA handouts, download our whitepaper "The BAFA handouts on the Supply Chain Act in brief".

The Supply Chain Act has been in force since January 1, 2023. Initially, there were still many unanswered questions regarding the specific implementation of the requirements. Now the BAFA (Federal Office of Economics and Export Control) is increasingly providing concrete guidelines and assistance in the form of handouts. So far, the guidelines on risk analysis, the complaints procedure and the principle of appropriateness and effectiveness have been published. These are intended to help companies to transform the abstract legal text into clear implementation measures by providing guidance.