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Germany Supply Chain Due Diligence Act (LkSG)

Germany Supply Chain Due Diligence Act (LkSG): Germany’s Supply Chain Due Diligence Act Enforces Global Human Rights Standards

Maílis Carrilho
Maílis Carrilho
Updated on November 4th, 2025
3 min read

Summary

The Germany Supply Chain Due Diligence Act (Lieferkettengesetz – LkSG), in force since January 2023, makes it mandatory for companies operating in Germany to prevent human rights and environmental violations across their supply chains. It applies to firms with more than 3,000 employees (and 1,000 from 2024) and requires them to identify and mitigate risks such as child labour, forced labour, unsafe working conditions, and pollution. Companies must establish risk management systems, complaint procedures, and publish annual due diligence reports. Enforcement is handled by BAFA, which can issue fines of up to 2% of global turnover or exclude companies from public contracts. The LkSG is a cornerstone of corporate accountability in Europe and a direct precursor to the EU Corporate Sustainability Due Diligence Directive (CSDDD).
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Details

Jurisdictions
  • Germany
Exempted entities

The Supply Chain Due Diligence Act is mandatory for companies above the employee thresholds.

Mandatory Requirements:

Conduct risk assessments for direct and indirect suppliers.

Take preventive measures to avoid violations.

Establish grievance and remediation procedures.

Publish annual due diligence reports on company websites.

Exceptions and Flexibility:

Smaller companies (<1,000 employees) are exempt unless covered indirectly as suppliers to larger entities.

Proportionality principle applies: measures must be reasonable given a company’s influence over its supply chain.

Companies can prioritise risk management based on severity and likelihood of impacts.

Deep dive

What’s Required

The Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz – LkSG) establishes binding obligations for companies operating in Germany to respect human rights and environmental standards across their global supply chains. The law requires companies to identify, prevent, and mitigate risks related to child labour, forced labour, occupational safety, environmental degradation, and other human rights abuses.

The act applies to companies that meet the following thresholds:

  • From 1 January 2023: Companies with at least 3,000 employees in Germany.

  • From 1 January 2024: Companies with at least 1,000 employees in Germany.

Key obligations include:

  • Conducting regular risk analyses on human rights and environmental impacts.

  • Implementing preventive and corrective measures across supply chains.

  • Establishing a complaint mechanism for affected individuals.

  • Reporting annually on due diligence procedures and outcomes.

Important Deadlines

  • June 2021: Law adopted by the German Bundestag.

  • 1 January 2023: Entry into force for companies with ≥3,000 employees.

  • 1 January 2024: Extended to companies with ≥1,000 employees.

  • 2026: Scheduled review of law effectiveness by the German government.

Current Status

The LkSG is in force and applies to both domestic and foreign companies with operations or subsidiaries in Germany. The Federal Office for Economic Affairs and Export Control (BAFA) monitors compliance and enforcement.

Germany’s act was one of the first comprehensive national due diligence laws in Europe and directly inspired the EU Corporate Sustainability Due Diligence Directive (CSDDD). It strengthens corporate accountability, ensuring that supply chains are managed ethically and sustainably while aligning German business operations with global sustainability frameworks such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises.

Penalties for Non-Compliance

BAFA may impose administrative penalties for breaches of due diligence duties, including:

  • Fines of up to €8 million or up to 2% of global annual turnover for companies with over €400 million in revenue.

  • Exclusion from public procurement for up to three years for serious violations.

  • Orders requiring companies to improve or implement specific due diligence measures.

BAFA also maintains a public register of enforcement actions for transparency.

Examples of Known Violations

As of early 2025, several investigations are underway, including against companies in the automotive, textile, and mining sectors, following NGO complaints related to working conditions and environmental harm abroad. BAFA has issued compliance warnings but has not yet levied major fines.

Resources

Maílis Carrilho
Written by:
Maílis Carrilho
Sustainability Research Analyst
Maílis Carrilho is a Sustainability Research Analyst (Intern) at Net Zero Compare, contributing research and analysis on climate tech, carbon policies, and sustainable solutions. She supports the team in developing fact-based content and insights to help companies and readers navigate the evolving sustainability landscape.