Guest contribution • 03.08.2022

Implementation of the Supply Chain Due Diligence Act in industry and trade

Creating transparency and acting more efficiently

On 1 January 2023, the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz – LkSG) will come into force, affecting both manufacturing and retail sectors. Sapio Research conducted a study of the LkSG’s implementation on behalf of K3 Business Technologies. The conclusion? That supply chain managers still have some work to do in order to comply with the legislation. But what impact does this have on retailers and what measures must they and resellers take now?

Sapio Research conducted a survey of 100 supply chain management decision-makers to find out how prepared companies are for the Supply Chain Due Diligence Act (LkSG) coming into force. A short summary of the main results follows:

  • Around a third of survey participants (34 per cent) have heard of this legislation but do not know its details. Of those that are aware of the need to comply with the LkSG, slightly more than half (53 percent) are still unable to act in a compliant manner.
  • Too many companies today still rely on time-consuming, manual or poorly automated processes for storing compliance information and certifications.
  • 93 percent of respondents are convinced that they need new technological solutions to fully implement and comply with the LkSG in their organisation.
  • Almost all respondents (98 percent) intend to use the issues of sustainability, reduced environmental impact and protection of workers' welfare in their supply chains for marketing purposes.
A man in a suit with folded arms smiles at the camera...
The author of this article is Karsten Kurella, Enterprise Sales Director at K3 Business Technologies.
Source: K3

Requirements for LkSG implementation

In order to effectively comply with the LkSG, companies must first review the legal requirements and establish a risk management process. This ongoing process should incorporate an annual risk assessment to determine the impact of the firm’s actions on human rights and the environment. Businesses must also establish a procedure for dealing with complaints – either handling these themselves or in cooperation with an external partner. 

"Should complaints arise, companies must demonstrate that they have followed the correct procedures. They should take action immediately and ensure that no problems can occur in the future. The law will certainly lead NGOs, environmental organisations and even the media to look for irregularities, resulting in even more investigations. The pressure on purchasing teams will grow. However, we will hopefully also see more stable relationships between buyers, retailers, factories and suppliers of raw materials," says Rik Veltman, Fashion Industry Expert at K3 Business Technology Group. 

If companies find violations of the LkSG, they are required to take remedial and preventive measures. Inaction could otherwise entail expensive consequences – transgressors face considerable fines. 

In addition, businesses are obliged to continuously document their compliance with the regulations and to provide a report – either publicly or for a supervisory authority – on the relevant measures taken each financial year. This is the only way to ensure that supply chain management is sufficiently transparent and that all parties in the supply chain – including retailers – can demonstrate compliance with the law. "With the LkSG coming into force, companies must be able to provide details of their supply chain management upon request. This request could stem from a government body, but could also come from the press or a customer. A company can delay providing details – depending on the urgency – but the obligation to comply with the LkSG still exists," Rik Veltman elaborates.

Integrating retail into the supply chain

The LkSG and other ESG (Environmental, Social and Governance) requirements show a clear direction of travel. The LkSG is a starting point for supply chains, and the information management supporting them, to become ever more transparent. In principle, it is still possible today for retailers to manually monitor and check compliance with the LkSG. However, this is very time-consuming, cost-intensive and error-prone. It is clear that the provision and exchange of supply chain information between the systems of those businesses involved will be faster if processes can be automated. Retailers should seek to automate data collection and transfer as much as possible – to create transparency, be compliant, and operate more efficiently. And they should start planning this strategy now, if they haven't already. 

Rik Veltman explains the current situation: "Today, both software companies and fashion companies are in the process of developing solutions for automated supply chains and have software in various stages of development. In the next two to three years, standardised solutions should emerge. Software companies should engage with customers to use their insights and develop solutions in a way that best supports supply chain management processes, enabling companies to become transparent." 

It's a collaboration because ‘transparency’ is not about the status of an individual item. Rather, transparency comes through a process of transformation –  with a different way of selecting materials, or developing and managing products. Fashion companies cannot just wait for new, capable software solutions. They also have to get to work. 

Anchoring sustainability in IT systems

The management, monitoring and documentation of supply chains are complex processes and place severe demands on IT. Efficient information management and a high degree of automation are required for the implementation of the LkSG. A modern software solution should be able to implement a sustainability strategy within the framework of the LkSG. To achieve this, it is necessary that all the relevant data for brands, suppliers and products are brought together in an uncomplicated way, and that structured procedures are implemented to monitor the corresponding certifications. 

  • Simple onboarding process for partners and suppliers, as well as query tools for suppliers to share information, facilitate cooperation and make processes more efficient.
  • Automated reminders in case of missing information or expiry of certificates enable companies to act in good time.
  • Reliable authentication of all relevant documents prevents manipulation and ensures maximum security.

In this context, it is important for retailers that consumers also have the possibility to retrieve information on LkSG compliance for individual items of clothing – for example with a smartphone using a QR code. Consumers also increasingly demand more transparency and prize brands that give priority to sustainability.

Author: Karsten Kurella, K3 Business Technologies

related articles:

popular articles:

Thumbnail-Photo: Serving customer expectations with fast delivery...
04.05.2022   #Tech in Retail #iXtenso videos

Serving customer expectations with fast delivery

Automated storage and retrieval system AutoStore @ NRF 2022

„Retail has truly changed,“ says Jon Schechter, Business Development Manager at AutoStore System in an interview at NRF 2022.The COVID pandemic has pushed e-commerce demand even further, customers expect fast and reliable ...

Thumbnail-Photo: Innovations in logistics from delivery to return...
11.05.2022   #Tech in Retail #logistics

Innovations in logistics from delivery to return

The new last mile: from orderable stores and smart packaging

Logistics on the so-called "last mile" can well tolerate clever solutions, the demand for orders is increasing and future-oriented, sustainable ideas are needed. This applies to delivery as well as transport packaging and the big issue of ...

Thumbnail-Photo: FedEx plans to test autonomous drone cargo delivery with Elroy Air...
25.04.2022   #e-commerce #logistic systems

FedEx plans to test autonomous drone cargo delivery with Elroy Air

FedEx and Elroy Air work to launch test flights aimed at middle-mile delivery in 2023

FedEx Express is teaming up with California Bay Area-based Elroy Air, the company building the first end-to-end autonomous vertical take-off and landing (VTOL) aerial cargo system. As a first of its kind agreement in the U.S., FedEx Express ...

Thumbnail-Photo: Glory expands presence to support growth in Poland...
14.04.2022   #logistics #cash management

Glory expands presence to support growth in Poland

Glory expands its direct sales & services presence in Eastern Europe to support growth in Poland

Glory has announced continued expansion, with the opening of a direct sales office in Warsaw. Glory Global Solutions (Poland) LLC will capitalise on growth in the Polish market specifically in retail sector. ...

Thumbnail-Photo: Blue Yonder: Most consumers willing to delay deliveries if its more...
04.05.2022   #sustainability #coronavirus

Blue Yonder: Most consumers willing to delay deliveries if it's more sustainable

Survey finds 86% of consumers willing to wait longer for their orders if it helps the environment, 44% say their interest in shopping sustainably has increased since the start of the pandemic

Blue Yonder has released findings from its 2022 Consumer Sustainability Survey, which revealed retail consumer preferences related to sustainable shopping habits. The survey found that more than three-quarters (86%) of consumers are willing to delay ...

Thumbnail-Photo: Visibility and control are consumers’ priorities for last-mile delivery...
25.03.2022   #customer satisfaction #services

Visibility and control are consumers’ priorities for last-mile delivery

Consumer demand: tracking deliveries via GPS and redirecting deliveries

Anyline announced findings of its “Last-Mile Delivery: Customer Perception Report 2022.” The survey, conducted on behalf of Anyline by Researchscape, highlights the major pain points of last-mile delivery that have surfaced since the ...

Thumbnail-Photo: Robomart signs deal with Unilever to launch The Ice Cream Shop Robomarts...
17.05.2022   #Tech in Retail #smartphone

Robomart signs deal with Unilever to launch "The Ice Cream Shop" Robomarts

Pilot partnership introduces ice cream delivery – arrives in as little as two minutes

Robomart, the world’s first store-hailing service, has announced a partnership with Unilever, the world’s largest ice cream producer, under its virtual storefront, The Ice Cream Shop. Unilever will deploy a fleet of Ice Cream Robomarts ...

Thumbnail-Photo: Ease of returns as top priority in online purchase...
09.02.2022   #online trading #e-commerce

Ease of returns as top priority in online purchase

Right returns process reaps the most consumer loyalty

89 percent of consumers identify ease of returns as top priority when purchasing online. That’s according to new data from delivery experience platform Sorted, which found that retailers who get the returns process right will reap the most ...

Thumbnail-Photo: Home pickup for convenient ecommerce returns...
16.03.2022   #customer satisfaction #services

Home pickup for convenient ecommerce returns

Narvar service available in ten major metros in the U.S. including San Francisco, NY, LA and Chicago

Narvar announced the rollout of its Home Pickup service, a carrier-agnostic returns service that allows shoppers to schedule a courier to pick up return packages at their homes. More than 70 retailers, including DSW and Ann Taylor, piloted the ...

Thumbnail-Photo: The iXtenso editorial team was hungry ...
28.02.2022   #delivery #online food retailing

The iXtenso editorial team was hungry ...

... and tested the Gorillas and Flink delivery services

Food delivery services in city centers are picking up speed. Drivers with oversized backpacks on their backs are increasingly common, sometimes even late at night. Popular services promise to deliver the groceries ordered via app to your doorstep ...

Supplier

GLORY Global Solutions (Germany) GmbH
GLORY Global Solutions (Germany) GmbH
Thomas-Edison-Platz 1
63263 Neu-Isenburg