What Baltic companies need to know about the German Supply Chain Act

The German Supply Chain Due Diligence Act (LkSG), which came into force on 1 January 2023, places high demands on companies to ensure human rights and environmental standards in their supply chains. Baltic companies that work as suppliers or business partners for German companies must also adapt to the new requirements. This article highlights the most important aspects that Baltic companies should consider and provides practical tips for successfully adapting to the regulations.

Basics of the Supply Chain Act

The LkSG obliges German companies with more than 3,000 employees (from 2024 from 1,000 employees) to identify and minimise human rights and environmental risks in their supply chains. The due diligence obligations include, among other things

1. Risk managementAnalysing and assessing potential risks along the supply chain.
2. Preventive measuresImplementation of standards and training to prevent violations.
3. Remedial measures: Measures to rectify identified infringements.
4. Reporting obligationsAnnual reporting on compliance with the requirements.

What requirements apply to Baltic suppliers?

Even if the LkSG only applies directly to German companies, it indirectly affects their international suppliers. Baltic companies should therefore:

• Create transparencyGerman business partners expect detailed information about production processes, materials used and working conditions.
• Ensure traceabilityIt is essential to have relevant documentation available, e.g. labour contracts, safety protocols or environmental certificates.
• Comply with standardsInternational standards such as ISO 14001 (environmental management) or SA8000 (working conditions) are particularly advantageous in the areas of occupational health and safety, environmental management and fair wages.

Practical steps for Baltic companies

1. analyse your own processes

Identify potential risks in your supply chains. This includes aspects such as the working conditions of your subcontractors, the origin of your raw materials or the handling of hazardous substances.

2. intensify cooperation with German partners

Close communication with German business partners helps to understand their specific requirements. Actively ask for the desired standards and certificates.

3. introduction of compliance programmes

Implement internal guidelines that meet the requirements of the LkSG. This can be done by external consulting companies or in-house compliance teams.

4. investments in certifications

Certification to recognised standards such as ISO 45001 (occupational safety) or FSC (sustainable timber production) can not only make it easier for you to comply, but also strengthen your competitiveness.

5. documentation and reporting

Ensure that all relevant processes and decisions are documented in writing. This facilitates communication with German partners and prevents misunderstandings.

Challenges and opportunities

Implementing the requirements of the LkSG can pose challenges for Baltic companies, e.g. through additional costs or bureaucratic effort. Nevertheless, adapting to these standards also offers opportunities:

• Market advantagesCompanies that operate sustainably and responsibly are more attractive to German business partners.
• Long-term securityPreventive measures reduce the risk of conflicts or legal disputes.
• CompetitivenessSustainability is increasingly becoming a decisive competitive advantage.

Conclusion

The Supply Chain Due Diligence Act places new requirements on German companies, which also affect their international business partners. For Baltic companies, this means creating transparency, complying with standards and intensifying cooperation with German partners. A proactive approach can not only help to fulfil the legal requirements, but also create long-term competitive advantages.

Source reference

• Federal Ministry for Economic Cooperation and Development (BMZ): Information on the Supply Chain Act.
• German Society for International Cooperation (GIZ): Guidelines for suppliers.
• Estonian-German Chamber of Commerce: Current information and workshops on the topic of compliance.