Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz - LkSG)

On the 1st of January 2023, the Supply Chain Sourcing Obligations Act (LkSG) will come into force. The LkSG aims to improve the protection of human rights in global supply chains. For companies, this legally means that adaptation strategies must be developed in the area of compliance.

The Supply Chain Sorgfaltsgesetz affects all companies, regardless of their legal form, that have

• have their head office, principal place of business, administrative headquarters, registered office or a branch office (§13d of the German Commercial Code) in Germany, and
• have at least 3000 employees in Germany (or posted abroad);
• from 1 January 2024: employ at least 1000 employees in Germany (or posted abroad).

For the companies concerned, this means in concrete terms that the so-called "due diligence obligations" must be fulfilled within the framework of the supply chain. The supply chain refers to all steps that are necessary to manufacture the products or provide the services of the company. The due diligence obligations include, among other things, the performance of regular risk analyses, the establishment of a risk management system, the anchoring of preventive and remedial measures, the establishment of complaints procedures, the definition of internal responsibilities, the documentation of measures and strategies, the submission of a policy statement as well as a report on the fulfilment of the due diligence obligations.

In the event of violations of the complex due diligence obligations, companies face fines of up to 8 million euros and, if necessary, exclusion from public tenders for up to three years. If it becomes known, there is also the threat of considerable damage to the company's image.

Our services:

BfU AG has been supporting companies in complying with legal requirements in their business organisation for four decades now. Our team of economists, lawyers, engineers and scientists will be happy to assist you with all elements such as:

• the establishment of an appropriate risk management system as well as the implementation of a risk analysis for the supply chains
• preparing and issuing a policy statement
• conducting training in the relevant business areas
• implementing a complaints procedure
• the preparation of the due diligence report

CSRD - Sustainability Report

In a world increasingly focussed on sustainability, many companies are facing major challenges. How will your company generate sustainable value for society in the future? What framework guidelines are there and how can they be implemented? What strategic course can your company set to respond to risks arising from environmental and social grievances such as climate change and economic inequality?

In future, the management report will provide information on the company's efforts to operate sustainably. The scope and form are based on the European Corporate Sustainability Reporting Directive (CSRD).  The aim of the directive is transparent and standardised reporting on the actions of the company. Reporting must be carried out as a separate part of the annual report and is audited externally.

The key topics to be documented in accordance with the CSRD go hand in hand with the 17 Sustainability Development Goals adopted in the 2030 Agenda, which represent a roadmap for the future to enable a decent life worldwide and at the same time preserve the natural foundations of life in the long term.

How does the company benefit from reporting?

Sustainability is no longer a formality. The reputation of companies and organisations depends more and more on transparency and purpose as a result of public discourse. If the company does not take the risks and opportunities of sustainability into account, this can result in reputational damage and a loss of value.

The advantage of the current reporting obligation in accordance with the European Sustainability Reporting Standards (ESRS) is that other formats, such as the report on the German Supply Chain Sustainability Act (LkSG) or the EU taxonomy, which is mandatory as part of the CSRD, can be integrated. Ultimately, the aim is to create a uniform, standardised reporting system that will enable investors and other stakeholders to understand their company's actions with regard to sustainability and to position their company for the future.

FAQ

What is the CSRD about?

The EU directive on sustainability reporting, the CSRD, is a new regulation that requires companies to provide comprehensive and detailed disclosure of their strategy, objectives and measures relating to key sustainability issues. Sustainability performance is concretised on the basis of predefined key figures and specified through mandatory report content in the ESRS.

Which companies are affected?

What is required?

Affected companies must work with their stakeholders to assess the materiality of sustainability issues throughout their value chain and then work out which of the more than 1,000 data points they disclose according to predefined criteria. Other specified disclosures will consist of qualitative information, such as how sustainability opportunities and risks are considered in the corporate strategy. Independent verification is required for all information.

Who is responsible?

Basically, the entire management team is responsible. The CEO, CFO, CSO, CIO and COO will shape the implementation of the guideline within the company. The Supervisory Board and the Audit Committee must monitor the company's sustainability reporting.

What if I already report?

The CSRD Directive has not yet been transposed into national law. The requirements of the CSR-RUG therefore currently apply. If your company already reports in accordance with standards such as GRI or DNK, these can serve as a supplement to the required ESRS.

What do we offer?

Review of the reporting obligation / needs analysis / status quo

Where does your company stand in terms of sustainability? Does your company fall under the CSRD reporting obligation? If so, for which financial year does your company have to report and to what extent? We offer an individual review of the current situation, provide workshops on the topic and check whether and to what extent your company is obliged to report. 

Determining the scope of reporting

Taking into account the stakeholders and the company structure, we offer a variety of reporting options in accordance with the current and most common standards. These include sustainability reporting in accordance with GRI, DNK, preparation for the CSRD and the reporting obligation in accordance with the European Sustainability Reporting Standard (ESRS).

Materiality analysis

Many reporting standards require a materiality analysis to be carried out in order to assess sustainability issues along the value chain. We offer a one-sided analysis (GRI) and a double materiality analysis. The latter is mandatory for companies that report in accordance with the current CSRD reporting standard.

Reporting

Once all the relevant data has been compiled and the materiality analysis has been carried out, we summarise the results for you in a sustainability report in accordance with the relevant standard.

EU taxonomy categorisation

The CSRD reporting obligation is accompanied by categorisation according to the EU taxonomy. The taxonomy is a valid EU-wide system for categorising sustainable economic activities. Investors should be given guidance for sustainable investments and provide capital for the green transformation of energy production and the economy. How much can your company benefit from the classification? What risks could arise if your company were to be classified as unsustainable?

We are happy to clarify these questions and carry out an initial assessment of the classification.