Supply Chain Due Diligence Act (LkSG) in Procurement Law 2026

Definition: The Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz – LkSG) is a German federal act that requires undertakings above a certain workforce size to comply with human rights and environmental due diligence obligations along their entire supply chain; in procurement law it creates exclusion grounds for tenderers proven to have breached these obligations.

Last updated: January 2026 · Legal basis: Act on Corporate Due Diligence Obligations for the Prevention of Human Rights Violations in Supply Chains (LkSG) of 16 July 2021, BGBl. I p. 2959; § 22 LkSG

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What is the Supply Chain Due Diligence Act?

The Supply Chain Due Diligence Act (LkSG), in force since 1 January 2023, for the first time legally obliges German undertakings based in Germany to protect human rights and environmental standards not only within their own operations but also at their suppliers worldwide and to take countermeasures in the event of breaches. The Act directly affects procurement practice, since § 22 LkSG introduces an exclusion ground in procurement law for tenderers that have been finally fined for LkSG breaches.

Scope of application

The LkSG applies on a graduated basis depending on the size of the undertaking.

Period	Minimum number of employees
From 1.1.2023	3,000 employees (in Germany)
From 1.1.2024	1,000 employees (in Germany)

The Act covers undertakings with their registered office, head office or principal place of business in Germany, as well as foreign undertakings with a branch office in Germany that exceed the thresholds.

Main due diligence obligations under the LkSG

The LkSG requires undertakings within its scope to set up risk-management systems and to take measures to prevent and remedy human rights violations and environmental harm.

Core duties:

1. Risk analysis: annual analysis of human rights and environmental risks in the undertaking's own business area and at direct suppliers
2. Policy statement: adoption of a human rights policy
3. Preventive measures: specific measures to minimise risk (e.g. contractual clauses, supplier audits)
4. Remedial measures: prompt response to identified breaches
5. Grievance procedure: establishment of an accessible complaints mechanism
6. Reporting: annual report on compliance with due diligence obligations (on the website and to BAFA)
7. Documentation: retention of evidence for seven years

LkSG and procurement law: exclusion ground under § 22 LkSG

§ 22 LkSG creates an explicit procurement-law exclusion ground: undertakings against which a final fine of at least EUR 175,000 has been imposed for a breach of the LkSG may be excluded from participation in public contracts.

In detail:

• Exclusion is discretionary (may, not must)
• It applies to contracts above the threshold
• The duration of exclusion is up to three years from the date the fine becomes final
• The Federal Office for Economic Affairs and Export Control (BAFA) supervises and sanctions LkSG breaches

Interaction with general procurement law

In addition to the specific exclusion ground under § 22 LkSG, LkSG breaches may have general procurement-law consequences.

• Under § 124 (1) No. 1 GWB contracting authorities can exclude tenderers that have breached their obligations in the areas of environmental, social and labour law
• LkSG breaches can be regarded as an indicator of lack of reliability
• Contracting authorities can require LkSG compliance as a selection criterion or contract performance condition

EU dimension: Corporate Sustainability Due Diligence Directive (CSDDD)

The EU Corporate Sustainability Due Diligence Directive (CSDDD, Directive (EU) 2024/1760), adopted in 2024, will, following national transposition, complement the LkSG in significant respects and harmonise the rules across Europe.

Key differences from the German rules:

• Lower undertaking thresholds (from 1,000 employees and EUR 450 million in turnover EU-wide)
• Inclusion of indirect suppliers in certain risk areas
• Civil-law liability (in contrast to the LkSG's fines-based approach)

FAQ

Do tenderers have to demonstrate LkSG compliance as part of the tender? There is no statutory duty to actively submit LkSG evidence. Contracting authorities can, however, require relevant declarations as a selection criterion. The exclusion ground under § 22 LkSG only applies where breaches have been finally established.

Does the LkSG also apply to foreign tenderers? The LkSG applies to undertakings with their registered office or branch in Germany. Foreign tenderers without a German nexus generally do not fall within the scope of the LkSG. Contracting authorities may, however, set LkSG-like requirements as performance conditions, which would then also bind foreign contractors.

What is BAFA and what role does it play? The Federal Office for Economic Affairs and Export Control (BAFA) is the competent authority for enforcement of the LkSG. It can impose fines and is the point of contact for complaints about LkSG breaches.

Are Austrian contracting authorities affected by the LkSG? The LkSG is German federal law and applies primarily to undertakings with a German nexus. Austria has no comparable national supply-chain act; Austrian contracting authorities and tenderers are generally not directly affected by the LkSG, but will be by the CSDDD after national transposition.

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Last updated: January 2026 All information without guarantee. For legally binding advice please consult a law firm specialising in procurement law.