In times of geopolitical uncertainty, rising raw material prices, and growing regulatory requirements, the ability to make supply chains resilient and sustainable has become a key competitive factor for the mid-market. The German Supply Chain Act (LkSG), in force in Germany since 2023, poses a particular challenge – but it also opens up opportunities for companies to optimize their processes and position themselves competitively for the long term. In this article, we explain how companies can comply with the LkSG and which solutions are particularly well suited to combining compliance with strategic goals.

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What is the German Supply Chain Act (LkSG)?

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The LkSG is a legal requirement that obliges large and mid-market companies to identify and assess human rights and environmental risks in their supply chains and to act preventively. While only companies with more than 3,000 employees were covered in 2023, the law also applies to companies with more than 1,000 employees as of 2024. In addition to direct suppliers, companies must also consider indirect suppliers where relevant risks exist.

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The main requirements of the LkSG:

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1. Risk management: Companies must conduct a risk analysis that covers the entire supply chain process. This includes identifying risks and deriving appropriate measures.
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2. Preventive measures: Preventive measures must be taken to avoid violations, such as training and obtaining contractual assurances from suppliers.
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3. Remedial measures: When risks or violations are identified, companies must act quickly to remedy them.
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4. Documentation and reporting: Companies are required to document their measures and submit an annual report to the German Federal Office for Economic Affairs and Export Control (BAFA).

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Key criteria for selecting solutions to implement the LkSG

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Implementing an effective LkSG compliance solution can make the difference between additional administrative burden and a genuine strategic opportunity. Key criteria to consider when selecting a suitable solution include:

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1. Automation and efficiency

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An automated risk analysis solution can significantly reduce the workload. Tacto, for example, offers software that automatically classifies all relevant suppliers based on country and industry risks and identifies where a deeper review is needed. This greatly reduces manual effort and allows procurement teams to focus on the suppliers that actually carry risk.

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2. Seamless integration

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Integrating the LkSG compliance solution into existing ERP systems is essential to avoid disrupting the flow of data within the company. Tacto is designed to fit smoothly into existing systems and can be implemented without lengthy IT projects – a major advantage for mid-market companies.

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3. Usability and supplier adoption

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High adoption among suppliers is essential for smooth collaboration. A user-friendly interface and simple processes make it easy for suppliers to respond to requests and provide data. Tacto enables companies to send requests and track responses in one central system, which makes processing much easier.

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4. Flexibility and scalability

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Regulatory requirements evolve constantly. The chosen solution should therefore be flexible and scalable to support future requirements and company growth. Tacto has a modular design and can be extended as needed, making it a future-proof choice.

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Conclusion: from obligation to opportunity

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For mid-market companies, implementing the LkSG can seem like a bureaucratic burden. With the right solution, however, it becomes a strategic opportunity: supply chain processes can be optimized and transparency increased. Providers such as Tacto enable efficient and sustainable implementation of the legal requirements and help companies not only meet their compliance obligations but also remain competitive in the long term. Strategic supplier management that aligns with the requirements of the LkSG can thus pave the way for future-proof, resilient supply chains.

If you want to learn more about implementing LkSG compliance or optimizing your supply chain processes, consider consulting specialized providers and starting a dialogue with experts.

In our webinar "Future-Proof Supply Chains: Supplier Management and Supply Chain Compliance in One Place" with André Petry, managing director of Tacto, and Karoline Rückerl, product expert at Tacto, we show how you can use the German Supply Chain Act (LkSG) as the starting point for digital supplier management.