After several months of discussion, the German Parliament ("Bundestag") adopted the "Act on Corporate Due Diligence in Supply Chains" (Supply Chain Due Diligence Act – "Act" or "LkSG") on 11 June 2021.1 The Act imposes, for the first time, a binding obligation on companies to establish, implement and update due diligence procedures to improve compliance with specified core human rights and, to a limited extent, environmental protection in supply chains.
This Act applies not only to companies with their registered office or principal place of business in Germany, but also to foreign companies that have a branch office in Germany. The new obligations for supply chain due diligence will inevitably impact foreign companies doing business with German companies.
The Act will come into force on 1 January 2023, giving companies a transitional period to prepare for their new supply chain due diligence obligations by revising their existing compliance management systems, establishing new processes, and training their employees accordingly.
