The German Supply Chain Act: Additional Compliance Measures Required?

The German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz; "LkSG"), which applies to companies seated in Germany or operating a German branch with 3,000 or more employees, entered into force on 1 January 2023.

Although Austrian and other non-German companies are not subject to the LkSG, they may form part of the supply chains of German companies bound by due diligence obligations under it. In a parallel step in February 2022, the European Commission adopted a proposal for a Directive on corporate sustainability due diligence, which the European Council confirmed in principle in December 2022. Thus, another layer of compliance obligations for companies seems to be emerging.