Supply Chain Due Diligence

Supply chain due diligence obliges companies to systematically identify and address their actual and potential adverse impacts on human rights and the environment within their own operations, at direct suppliers and, where there are substantiated grounds, at indirect suppliers as well. Rather than a mere code of conduct, it is an ongoing, process-based approach modelled on internationally recognised standards, in particular the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

At its core, due diligence follows a risk-based logic: measures must be appropriate and prioritised according to the nature and scale of the business, the company's ability to exert influence, and the severity and likelihood of the potential harm. The process typically comprises anchoring a policy statement, regular and event-driven risk analyses, preventive and remedial measures, the establishment of a grievance mechanism, and continuous effectiveness monitoring and documentation. It is an obligation of effort, not a guarantee of a violation-free supply chain.

In Germany, the Supply Chain Due Diligence Act (LkSG) specifies these requirements for large companies and is enforced by the Federal Office for Economic Affairs and Export Control (BAFA). At the European level, the Corporate Sustainability Due Diligence Directive (CSDDD) extends the approach across the entire chain of activities and links it to civil liability and climate transition plans. Due diligence is therefore closely interwoven with sustainability reporting under the CSRD and ESRS, which require disclosure of processes, risks and measures along the value chain.