A study by BME and IntegrityNext examined the current implementation status of the Supply Chain Act. Although many companies have concrete solutions, there is still a lot to be done by January 1, 2023.
German companies are currently preparing for the Supply Chain Act and its transparency requirements in terms of sustainability in the global supply chain. However, they still face challenges in the operational implementation of the Supply Chain Due Diligence Act (LkSG). There is a lot of catching up to do, especially when it comes to introducing a risk management system. This is the result of a survey conducted by the solution provider IntegrityNext and the Federal Association of Materials Management, Purchasing and Logistics (BME).
Accordingly, the majority of companies already carry out supplier assessments on sustainability issues such as human and labor rights and environmental protection. The majority of the companies surveyed will now also check their supplier network for sustainability criteria within the meaning of the LkSG within the next six to twelve months. The consideration of so-called ESG criteria (environmental, social and governance) in risk management and the decision-making process is not only driven by legal requirements. The company’s sense of responsibility, maintaining its competitiveness and pressure from its own customers also play a role here.
Supply chain law requires a lot of time
81 percent name the time required to implement the supply chain law as the greatest challenge. For 75 percent, the challenge lies in collecting and processing the high volume of data that arises when examining the sustainability performance of hundreds or thousands of direct suppliers. Against this background, according to 84 percent of those surveyed, either individual managers or dedicated teams should be commissioned to deal with this new challenge in the supply chain law.
For the majority, the use of a technology-based solution tailored to the LkSG requirements for the systematic collection and analysis of supplier data is planned. The Supply Chain Due Diligence Act will come into effect on January 1, 2023, initially for companies with more than 3,000 employees. A year later, on January 1, 2024, the threshold will be lowered to 1,000 employees. For many of the companies affected, there is only a year left for preparation and implementation.
Focus on sustainability at suppliers and in supply chains
“The relevance of sustainability for suppliers and in supply chains is increasing unabated. Businesses must prepare now to ensure compliance with the new Supply Chain Due Diligence Act requirements by January 2023. The issue can be solved with technology and digitization, but doing nothing is not an alternative,” says Martin Berr-Sorokin, CEO of IntegrityNext.
“The majority of the companies surveyed already rate their suppliers in terms of sustainability. However, there is a difference between risk analysis and risk management. The latter still requires readjustment in most companies in order to professionally counter sustainability risks,” adds Dr. Helena Melnikov, General Manager of the BME.
About the methodology of the survey: For the study “Sustainable, transparent supply chains: How well positioned are German companies today for the Supply Chain Act?“, the solution provider IntegrityNext and the Federal Association of Materials Management, Purchasing and Logistics (BME) conducted an online survey with 282 participants.
IntegrityNext is a solution provider for monitoring sustainability and compliance in the supply chain. The risk management software enables companies to quickly and cost-effectively review their supplier base with regard to sustainability-related regulations such as the Supply Chain Act, standards and voluntary commitments. IntegrityNext helps to identify and manage ESG risks along the value chain.