The year 2023 is here – and with it the enforcement of the new German Supply Chain Act (LkSG). Over the past year, and even more so since 1 January, companies have been stepping up their efforts to establish human rights due diligence processes, with a human rights risk management system at their core. A risk management system such as this fulfils the overarching role of being aware of, and responding to, a company’s human rights risks.
Companies typically operate in a variety of countries, and their products and services cover a wide range of different supply chains. They also have business relationships with hundreds, sometimes thousands, of suppliers. This all means that companies need to take a pragmatic and risk-based approach to human rights, moving from an abstract to a more concrete analysis of risks over time.
An important starting point for addressing the issue of human rights risks in the supply chain is to consider the country risk: whether a country has signed and ratified key ILO conventions, whether human rights laws are in place and effectively being enforced, whether high levels of corruption or conflict are undermining such efforts, or whether the socio-cultural context allows for structural discrimination against certain groups of people. All of this plays a critical role in determining the level of risk to supply chain workers, local communities, or other rights holders. The country of operation or sourcing is therefore an important determinant of the level of human rights risk in a company’s supply chain or operations, alongside the sector and the business activity itself.