In times of geopolitical uncertainty, rising commodity prices and increasing legal requirements, the ability to make supply chains resilient and sustainable has become a key competitive factor for SMEs. The Supply Chain Duty of Care Act (LKSG), which has been in force in Germany since 2023, poses a particular challenge, but also opens up opportunities for companies to optimize their processes and position themselves competitively in the long term. In this article, we explain how companies can comply with the LKSG and which solutions are particularly suitable for combining compliance and strategic goals.

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What is the Supply Chain Due Diligence Act (LKSG)?

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The LKSG is a legal requirement that obliges large and medium-sized companies to identify and assess human rights and environmental risks in their supply chain and to take preventative action. While only companies with more than 3,000 employees were affected in 2023, the law will also apply to companies with more than 1,000 employees from 2024. In addition to direct suppliers, companies must also consider indirect suppliers if there are relevant risks.

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The main requirements of the LKSG:

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1. Risk management: Companies must carry out a risk analysis that covers the entire supply chain process. This includes the identification of risks and the derivation of suitable measures.
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2. Preventive measures: Preventive measures must be taken to prevent violations, such as training and demanding contractual assurances from suppliers.
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3. Remedial measures: Where risks or breaches are identified, companies must take swift action to address them.
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4. Documentation and reporting: Companies are obliged to document their measures and submit an annual report to the Federal Office of Economics and Export Control (BAFA).

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Important criteria when selecting solutions for implementing the LKSG

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Implementing an effective solution to comply with the LKSG can make the difference between additional administrative burden and a real strategic opportunity. Important criteria to consider when selecting a suitable solution are:

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1. automation and efficiency

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An automated solution for risk analysis can significantly reduce the effort involved. Tacto, for example, offers software that automatically classifies all relevant suppliers based on country and industry risks and thus recognizes where there is a need for more in-depth checks. This significantly reduces manual effort and allows you to focus on suppliers that are really at risk.

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2. seamless integration

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The integration of the LKSG compliance solution into existing ERP systems is crucial in order not to disrupt the flow of data within the company. Tacto is designed to fit easily into existing systems and can be implemented without lengthy IT projects, which is a great advantage for medium-sized companies.

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3. user-friendliness and supplier acceptance

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A high level of acceptance among suppliers is essential to ensure smooth collaboration. A user-friendly interface and simple processes make it easy for suppliers to respond to requests and provide data. Tacto enables requests to be sent and responses to be tracked in a centralized system, which makes processing much easier.

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4. flexibility and scalability

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Regulatory requirements are constantly evolving. Therefore, the chosen solution should be flexible and scalable to support future requirements and business growth. Tacto is modular and can be expanded as required, making it a future-proof choice.

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Conclusion: From duty to opportunity

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Implementing the LKSG can seem like a bureaucratic burden for SMEs. However, with the right solution, it can become a strategic opportunity: supply chain processes can be optimized and transparency increased. Providers such as Tacto enable efficient and sustainable implementation of the legal requirements and support companies in not only meeting compliance requirements, but also remaining competitive in the long term. Strategic supplier management that combines with the requirements of the LKSG can therefore pave the way for future-proof and resilient supply chains.

If you want to learn more about implementing LKSG compliance or optimizing your supply chain processes, you should consider consulting specialist providers and engaging in dialogue with experts.

In our webinar "Future-proof supply chains: supplier management and supply chain law from a single source" with André Petry, Managing Director of Tacto, and Karoline Rückerl, product expert at Tacto, we will show you how you can use the Supply Chain Act as a starting signal for digital supplier management.