Survey shows high burden on companies in the IHK district
After around one and a half years of the Supply Chain Due Diligence Act (LkSG), the Düsseldorf Chamber of Industry and Commerce is taking stock in the form of a survey among its member companies. Around 170 companies from various sectors in Düsseldorf and the Mettmann district took part in the survey in July 2024, most of them small and medium-sized companies with fewer than 1,000 employees.
While criticism of the Supply Chain Due Diligence Act continues to prevail overall, some companies also see opportunities in it. The main focus is on reputation, corporate values and responsibility. Large companies hope for more transparent and effective supplier management.
“The general tone has not changed since our survey a year ago. Not only large companies, but also many small and medium-sized companies see the law as a burden. Despite the opportunities that some companies see, they continue to express dissatisfaction with the high bureaucratic hurdles and the cost burden. This is causing some companies to question their international competitiveness,” says Ralf Schlindwein, International Managing Director of the Düsseldorf Chamber of Industry and Commerce.
Every second company would welcome the law being suspended until the EU supply chain directive is implemented into German law. A debate that Economics Minister Robert Habeck initiated before the summer break.
The biggest criticism of the Supply Chain Due Diligence Act across all company sizes is the bureaucratic burden it entails. Companies must identify, assess and prioritize the risks in their supply chains. Based on the results, a policy statement must be published and measures must be taken to prevent or minimize any violations of human rights and damage to the environment. In addition, companies must set up complaint channels for people in the supply chains and report regularly on supply chain management.
A further challenge is the complexity of the company’s own supply chain and the ability to influence suppliers, regardless of the size of the company.
Inadequate overview of working and production conditions: Only 30 percent of large companies with 1,000 or more employees have an overview of the conditions of all their direct suppliers. For 70 percent, knowledge is patchy.
“However, this does not necessarily have to become a problem, as the Supply Chain Due Diligence Act only requires companies to take a risk-based approach,” Schlindwein concluded.
The situation is similar for small and medium-sized companies: only one in four companies with fewer than 1,000 employees in Düsseldorf and the Mettmann district stated that they knew the conditions of all their direct suppliers.
Increased personnel costs are required for companies of all sizes to comply with the law: almost 50 percent of large companies required one or two additional full-time positions. A third even needed five or more. Many SMEs also had to reorganize, but with fewer employees.