The German Supply Chain Act

What does it mean for Swiss companies?

Germany leads the way in due diligence for human rights along supply chains. The German Bundestag passed the introduction of the German Supply Chain Act (LkSG) on corporate due diligence to prevent human rights violations in supply chains on June 11, 2021. The core of the act, which will apply from 2023, sets out the framework within which companies must ensure the protection of human rights in supply chains.


For many German companies, the introduction of the act will have far-reaching consequences for the organization of their supply chains. The act formulates an extensive catalog of rights-related prohibitions with the explicit inclusion of numerous international law conventions. In addition to corporate due diligence obligations to prevent human rights violations, the act also includes obligations to uphold environmental standards in supply chains, acting as a law of mutual control. 

In November 2020, Switzerland also voted on a similar corporate responsibility initiative aimed at making Swiss-based companies liable for their supply chain. The act would have enforced environmental standards in addition to social standards. At that time, the initiative received the majority of the electoral votes, but not the required cantonal majority.

The Fraunhofer Society, based in Germany, is currently preparing for the introduction of the Supply Chain Act and innovating its purchasing processes. As the world’s leading organization for application-oriented research, the Fraunhofer Society plays a central role in the innovation process of the European economy. Fraunhofer Central Purchasing is responsible for the purchasing activities of the Society’s 76 institutes as well as the headquarters, with an annual purchasing volume of 1 billion euros, and it handles purchasing via its own procurement platform. In view of the high volume of contracts awarded, the dynamic and complex requirements, and the heterogeneous supplier base, there is an increasing demand for a structured approach in order to adequately comply with the due diligence requirements of the Supply Chain Act vis-à-vis suppliers.

How do purchasing preparations affect Swiss suppliers?

Fraunhofer Purchasing has already implemented the first far-reaching measures to systematically and sustainably protect human rights and the environment along its supply chain, and is thus a pioneer in meeting the requirements of the Supply Chain Act. The measures are aimed at making the supplier selection process more careful from a social and ecological point of view, in addition to with respect to procurement law aspects, and at creating more transparency with regard to compliance with due diligence obligations. This transparency is achieved through various approaches.

In terms of supplier selection, supplier intelligence solutions, supplier evaluations and supplier audits are designed to ensure that high-risk suppliers are identified before contracts are awarded. In addition, the use of supplier certifications, declarations of commitment and quality seals as proof of compliance with standards is to be promoted, and environmental management systems are to be queried. These measures are intended to ensure compliance with human rights and environmental standards as early as the selection process.

In order to remain attractive as a Swiss supplier of goods and services on the German market, it is crucial to prepare for the upcoming changes in legislation and to review compliance management systems at an early stage with respect to the need for adaptation with regard to environmental and human rights risks. In this way, it can be ensured that suppliers will not be excluded because of insufficient compliance with human rights and environmental standards or even excluded from public procurement procedures on the basis of the exclusion justification set out in Section 22 of the Supply Chain Act.

The EU as well is now planning to regulate corporate due diligence along global supply chains. At the same time, customer requirements are constantly evolving in the direction of corporate social responsibility. If obligations are not implemented or are implemented inadequately, companies also face a considerable reputational risk. Sustainable and social change is therefore also indispensable for Swiss companies from a legal as well as economic perspective.


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