LkSG complaints procedure

The German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG) requires companies in scope to set up an appropriate internal complaints procedure (section 8 (1) LkSG). The channel must allow anyone to flag that human rights or environmental risks have arisen, or that related obligations have been breached, as a result of the company's economic activity in its own business area or at a direct supplier. Section 9 (1) LkSG extends this: the procedure must also accept reports about risks and violations at indirect suppliers, so its reach does not stop at the first tier. As an alternative, a company may participate in an external complaints procedure, provided that procedure meets the statutory criteria. The complaints channel is therefore not a stand-alone reporting tool but an equal element of due diligence alongside risk analysis, preventive measures and remedial action: it surfaces intelligence from the supply chain that a purely desk-based risk analysis cannot capture.

The law sets concrete quality requirements. The company must adopt rules of procedure in text form and make them publicly available (section 8 (2) LkSG). The people running the procedure must guarantee impartial conduct – in particular they must be independent, free from instructions and bound to confidentiality (section 8 (3) LkSG). Under section 8 (4) LkSG the company must communicate clearly who is responsible and how the process works; the procedure must be accessible to potential participants, protect the confidentiality of the complainant's identity and provide effective protection against disadvantage or punishment because of a complaint. Accessibility has to be read practically: language, channel, reachability without internet access, and comprehensibility for workers or local communities in sourcing countries matter as much as a low-threshold option to report anonymously. Effectiveness must be reviewed at least once a year and on an ad-hoc basis whenever the risk situation changes or expands significantly (section 8 (5) LkSG).

Enforcement lies with the Federal Office for Economic Affairs and Export Control (BAFA); a missing or deficient complaints procedure can be sanctioned as an administrative offence under section 24 LkSG, with fines of up to EUR 800,000 and, for companies with an average annual turnover above EUR 400 million, up to two per cent of global annual turnover. The LkSG channel should be distinguished from the internal reporting channel under the German Whistleblower Protection Act (HinSchG): the two may share technology and staff, but they differ in the subject matter that can be reported and in who is entitled to report, so the rules of procedure and responsibilities should describe both clearly. At EU level, the Corporate Sustainability Due Diligence Directive (CSDDD) foresees a comparable notification and complaints mechanism; its timetable and level of detail have, however, been pushed back by the Omnibus package and the "stop-the-clock" directive and remain subject to revision. German law is likewise in motion – reporting duties have been eased and a replacement of the LkSG by a CSDDD implementation act has been announced politically – yet the substantive due diligence duties, including the complaints procedure, continue to apply.