Supply Chain Act (LkSG) for Suppliers: What to expect if your customer is affected

The Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) directly obligates only companies with 1,000 or more employees in Germany – currently around 4,800 businesses. For medium-sized enterprises, a different number is more relevant: over 50,000 suppliers are indirectly affected because their LkSG-obligated customers pass their own due diligence obligations down the supply chain. This article explains what this means in practice – for you as a supplier, not as a directly obligated company.

Directly vs. indirectly affected: the crucial difference

Directly affected are companies with 1,000 or more employees based or with a branch office in Germany – they must conduct risk analyses, implement preventive measures, and establish a complaints procedure.

Indirectly affected are the suppliers of these companies. They do not have their own legal reporting obligation – but their customers pass the due diligence obligation on contractually or via questionnaires because they have to audit their own supply chain. In practice, this usually manifests as an inquiry: a questionnaire, a contractual clause, a self-assessment (see Filling out the supplier self-assessment).

The most important practical point: If you as a supplier receive an LkSG-related inquiry, it is almost always about this second category – not about you falling under the law yourself.

The current state of regulation

In the course of the EU Omnibus Reform, the enforcement of the LkSG was noticeably scaled back: the reporting obligation to the BAFA was de facto suspended, and fines are only imposed in the event of particularly severe violations. However, the fundamental due diligence obligations – risk analysis, prevention, internal documentation – remain in place for directly affected companies, and with them, the need for data from suppliers remains. In the long term, the LkSG is to be replaced by a law adapted to the EU CSDDD directive; a transitional phase applies until then.

For suppliers, this means: in the short term, inquiries will likely become less formalized, but they will not fundamentally disappear – major customers must continue to monitor their supply chain, regardless of the level of detail of their own reporting obligation.

What customers actually demand from suppliers in practice

• Self-assessments on labor and environmental standards, often in the form of questionnaires

• Contractual assurances, e.g., a code of conduct accepted by the supplier

• Proof upon request if there is a concrete indication of risk – for indirect suppliers, the customer's due diligence obligation only applies on an event-driven basis

• Participation in industry initiatives, sometimes as an alternative to individual separate verifications

The most common mistake: misunderstanding the inquiry as an individual reporting obligation

A recurring misunderstanding is treating an LkSG-related customer inquiry as a personal legal obligation – involving a correspondingly high, often unnecessary effort. In practice, a solid, comprehensible self-assessment based on actual data is sufficient in most cases – rather than a complete, formal LkSG report, which is only intended for directly obligated companies anyway.

How strait simplifies preparation for LkSG inquiries

strait continuously records energy and environmental data via IoT sensors – a central component of the environmental data regularly requested in LkSG-related customer inquiries. This first reduces your own energy costs and at the same time provides resilient, up-to-date values to answer customer inquiries quickly and traceably – without starting from scratch with every new inquiry.

Received an LkSG inquiry from a customer? In a demo, we will show you how the necessary environmental data can be prepared in a structured way.

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