Supply Chain Act
The Supply Chain Sourcing Obligations Act – Challenge and Opportunity for Purchasing
With the Supply Chain Sourcing Obligations Act (LkSG) passed in 2021, respecting human rights and protecting the environment in global supply chains will become an obligation for German companies and companies operating in Germany. We at Kurtz Ersa are aware of this responsibility and expressly endorse the objectives of the Supply Chain Act. We have underlined this approval once again by joining the UN Global Compact last year – and by creating a dedicated position for sustainability and LkSG management in Purchasing 2022. This gives the LkSG the necessary strategic relevance. Dietmar Borgards, CPO, and Neele Teich, Sustainability and LkSG Manager in Central Purchasing, explain what the LkSG means for Kurtz Ersa.
What changes does the LkSG bring for the central purchasing department?
The Supply Chain Act brings fundamental changes and will not only challenge us as Purchasing, but also our authoritative cooperation as an interface function, e.g. with our Development and our suppliers. From the past three years, we are already used to adapting to rapidly changing framework conditions. Now we have to reconcile security of supply and the flexibility this requires with the exercise of our due diligence. To this end, among other things, our central purchasing processes and our risk management must be adapted.
What are currently the biggest challenges in implementing due diligence?
We currently see the lack of transparency in our supply chains as one of our greatest challenges. Obtaining information to better assess the supplier´s risk disposition involves significantly more effort. And sometimes it is not enough to just send out a questionnaire to get a picture of the supplier. It is also problematic that the law still leaves a lot of room for interpretation. Uniform standards are lacking in many places, and so the path to LkSG compliance feels a bit like walking in fog that will hopefully clear soon. Here, we are increasingly relying on the exchange with the Agency for Business and Development, associations, other friendly companies and, of course, with our suppliers.
What opportunities does the LkSG offer?
The Supply Chain Act enables us to create more transparency in our supply chains and optimize our risk management. This enables us to identify risks at an early stage, take responsibility and initiate positive developments. The LkSG also enables us to engage more closely with our suppliers, identify and tap new potential and drive forward existing ones. This will make purchasing more resilient in the long term.
Where do we currently stand?
We first took a close look at the existing purchasing processes and expanded the supplier selection and approval process to include social and ecological criteria. It quickly became clear that the complexity of the processes and data could only be handled with digital support. In addition, we had to document everything in a comprehensible manner.
Therefore, the next step was to select a suitable software solution for performing risk analyses, supplier surveys, and the creation and management of action plans. In the end, we decided in favor of osapiens. Here, a partnership-based cooperation was also an important selection criterion, because the Supply Chain Act and, in perspective, the EU Directive on Corporate Due Diligence will accompany us in the coming years and require close cooperation. We have found a strategic partner in osapiens. We started the project with osapiens on April 3 and plan to have our system operational by September 1.
What are our next steps?
We still have some way to go on the road to LkSG compliance. We consider the implementation of training courses and supplier days to be essential, because only if we sensitize our colleagues and our suppliers to the contents of the Supply Chain Act can we jointly protect human rights and the environment in our supply networks and promote the topic of sustainability. To this end, we are working on appropriate training materials and plans for employees and suppliers. We are sure that we will ALL master the requirements of the LkSG together!