“Appropriateness” under the LkSG
Since January 1, the German Supply Chain Due Diligence Act (LkSG) has required companies to take responsibility for human rights and environmental standards in their own operations and along their supply chains.
To assist companies in the rather challenging task of understanding and fulfilling their obligations, the German Federal Office for Economic Affairs and Export Control (BAFA) published additional guidelines in January 2023 on how to implement not only meaningful, but also “appropriate” human rights due diligence procedures.
Below, we list some of the questions affected companies have and what the BAFA Guideline reveals in connection with each of those questions.
What does “appropriate” mean in the context of human rights due diligence?
The LkSG requires companies to assess whether their due diligence processes, such as their risk analysis and respective preventive measures, are appropriate. The approach, which is based on the UN Guiding Principles on Business and Human Rights (UNGPs), aims to avoid overburdening companies, by allowing them discretion when it comes to the risks they address, the prioritisation of these risks and the extent to which they address them. In the LkSG, the principle of “appropriateness” (Section 3 (1)) covers the implementation of all steps of the due diligence process, from the allocation of resources to the relevant departments all the way to the remediation of violations.
How is “appropriateness” determined?
The LkSG sets out four criteria for a company to consider when determining whether its actions are appropriate (§3 (2)):
- The nature and scope of a company’s activities
- The severity, including scope, scale and irremediability, of a risk or violation, as well as its likelihood
- The company’s ability to influence the direct perpetrator of a human rights or environmental risk or violation
- The nature of a company’s causal contribution to the risk or violation, which is closely linked to the third criterion