Are you sure you are ready for the Supply Chain Due Diligence Act (LkSG)? Companies with over 1000 employees operating in Germany should read this.
While companies with over 3,000 employees are already subject to the LkSG, from January 1, 2024 the law will apply to all companies in the clothing industry with at least 1,000 employees doing business in Germany. This also includes e-commerce companies that sell in Germany. Many companies find it difficult to prepare for this. The law requires careful consideration of the entire supply chain and the collection of documented evidence. This can place a significant strain on resources – unless the right tools are in place to support the employees responsible for compliance and sustainability.
Understanding the LkSG: What do you have to do to be compliant?
In summary, the Supply Chain Due Diligence Act (LkSG) requires companies to:
- Appoint a person for compliance work.
- Implement an adequate risk management system along the supply chain with regard to human rights risks.
- Carry out risk analyses.
- Take preventative and remedial measures – such as conducting social audits and taking action based on the results.
- Implement a safe process for employees across the supply chain to identify human rights violations and file a complaint – such as signing a contract with their suppliers that includes social commitments and procedures in place.
- Providing an annual report on the company’s efforts and supply chain development in social compliance.
Social due diligence requires a significant amount of work for any company, let alone medium-sized companies. There are tools available today to save time and help businesses become and stay compliant. Take advantage of these!
However, how do you know what you need?
When it comes to investing in tools, no one wants to overinvest and use multiple platforms. However, as a business, you want to make sure you have the right tools in place from the start, as not doing so could cost you time and money in the long run. Here’s a good tip.
To comply with the LkSG, fashion brands can rely on certified social standards that check whether the rights of international and local workers are protected. These include certifications such as AMFORI BSCI, SEDEX SMETA, Higg FSLM, Social and Labor Convergence Standard. These attach particular importance to the human rights risks mentioned in the LkSG. Therefore, the most important tool a company could invest in is something that will help them, in terms of due diligence, keep track of all these social audits and their ongoing validity and detailed results. The Certificate Manager module from Trimco Group’s ProductDNA® was developed for this purpose.
ProductDNA® helps companies collect clear information and back up compliance requirements and ESG claims with data. In addition, ProductDNA® is customizable. Companies can choose the modules they need and focus on the performance indicators that are relevant to them. This means that companies that now deal specifically with the LkSG can focus their due diligence obligations using the Certificate Manager. The module is designed to reduce the workload for companies. It focuses on collecting verified employee rights audits from third parties and allows companies to monitor a variety of different social standards, making the task easier for the supply chain. The Certificate Manager supports the planning of the required prevention and remedial measures and enables companies to keep track of the corrective measures agreed with their supply chain.
ProductDNA® saves companies time: the supplier onboarding processes and data collection are designed to be simple. As part of the supply chain, Trimco Group knows the suppliers of clothing companies well. Trimco Group trains and onboards suppliers locally with the help of its local customer service teams, ensuring a fast and efficient support service. In less than a year, over 500 suppliers can be connected to the platform.
ProductDNA®’s Certificate Manager is the platform that collects current data on suppliers’ social, environmental, chemical and quality-related credentials. It features a dashboard that provides companies with an easy-to-use overview of their supply chain performance, includes an overview of key indicators and certificate validity, and ultimately supports the company’s reporting process, which is crucial for the LkSG Act .
In addition, ProductDNA® is connected to Trimco Group’s extensive branding, trimming and RFID services. This means companies can communicate their ESG efforts at the product level directly to consumers via QR codes on labels or via NFC technology, taking the first step towards digital product passport (DPP).
The LkSG is just the beginning and companies’ due diligence obligations will continue to increase. Recently, the European Union issued its own CSDD (Corporate Social Due Diligence) directive, the requirements of which include, but are not limited to, the LkSG.
As a company, you could be directly or indirectly affected by all current and upcoming regulations. So make sure you are compliant on time. For more information about ProductDNA® and the modules that may be relevant to your company, contact your local contact at Trimco Group (Germany) GmbH or visit the Trimco Group website.