Supply Chain Training by the Funk Risk Academy: Practical Implementation of Due Diligence Obligations in Supply Chain Management

The German Supply Chain Act (LkSG) is a law within the German legal framework that came into force on 1 January 2023 and has applied to companies with at least 1,000 employees since 2024. It obliges companies to systematically identify, assess, and minimize human rights and environmental risks along their supply chains.

These obligations extend not only to a company’s own operations but also to direct suppliers and – under certain conditions – indirect suppliers. In addition to risk analyses and preventive measures, the LkSG requires transparent internal documentation as well as awareness-raising and training for employees and high-risk suppliers.

The German Supply Chain Act explicitly identifies training and awareness measures as appropriate preventive measures.

The objective is to identify risks early, clarify responsibilities, and ensure the practical implementation of due diligence obligations within the company and among high-risk suppliers. Training helps communicate legal requirements clearly, systematically reduce risks, and document compliance with obligations in a transparent and verifiable way.

With the Corporate Sustainability Due Diligence Directive (CSDDD), the European Union has established a European-wide framework for human rights and environmental due diligence obligations. The directive entered into force in July 2024 and follows principles similar to the German LkSG.

Following the trilogue negotiations, a compromise was reached at the end of 2025 that aligns the CSDDD more closely with the Corporate Sustainability Reporting Directive (CSRD) and adjusts thresholds as well as practical obligations.

For many companies, the CSDDD will only become mandatory at significantly higher thresholds. According to the current status, the binding application of the substantive due diligence obligations is scheduled for 26 July 2029. Currently, discussions refer to companies with more than 5,000 employees and €1.5 billion in turnover.

The CSDDD is therefore considered the future European standard. However, in practical terms it is currently less concrete and less immediately applicable than the already effective German Supply Chain Act.

The German Supply Chain Act is expected to be amended through a draft bill by the German government in order to reduce administrative burdens for companies and make enforcement more practical.

A key element of the reform is the complete abolition of the statutory reporting obligation. In future, enforcement will focus primarily on serious violations. However, the due diligence obligations defined in the LkSG will remain unchanged.

Companies must still ensure:

• the implementation of risk analyses
• the execution of appropriate preventive and remedial measures
• internal documentation and verifiable records

For companies, this means that even without a formal reporting requirement, processes and measures must still be designed in ways that they are clearly documented, effectively implemented, and auditable – particularly in light of the EU Supply Chain Directive (CSDDD), whose substantive due diligence obligations are expected to apply to affected companies from 26 July 2029 following the latest Omnibus update.

Violations of the due diligence obligations of the German Supply Chain Act may still result in fines and exclusion from public procurement procedures.

In addition, reputational and liability risks are becoming increasingly important, as business partners, customers, and investors are placing greater emphasis on responsible supply chain management.

Requirements are increasingly implemented through contractual frameworks, such as:

• Supplier Codes of Conduct (SCoC)
• compliance clauses
• ESG commitments

As a result, companies that fail to comply may also face civil claims, contractual penalties, or recourse claims from customers.

Regardless of future European developments, the German Supply Chain Act currently remains the primary legal framework for companies in Germany.

Companies that act proactively now can create legal certainty, reduce risks, and prepare for upcoming EU requirements at the same time. Targeted training fosters understanding, raises awareness of risks, and helps companies fulfill their due diligence obligations effectively, reliably, and with a forward-looking approach.