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One of a kind – the German Lieferkettensorgfaltspflichtengesetz
The German Act on Due Diligence in the Supply Chain (Lieferkettensorgfaltspflichtengesetz - LkSG) will apply from 2023. As a first step, companies with more than 3,000 employees fall within the scope of the Act and will need to take measures to comply. From 1 January 2024, this threshold drops to 1,000 employees. In addition to the risk analysis and prevention requirements with respect to compliance with environmental protection and human rights laws, companies that fall under the scope of the Act are also required to implement a complaints procedure, which has only been regulated partially by law. However, the effective use of this procedure is part of risk management. Improper implementation or failure to implement a complaints procedure is subject to a fine. Only if the complaints mechanism works along the supply chain can companies be sure that there is neither a violation of the twelve human rights or eight environmental risks covered nor sufficient probability of such a violation.
Not just the company – but all along the supply chain
The law itself and therefore the legal obligation in § 8 LkSG is linked to the company. However, the internal implementation of a complaint procedure would be insufficient. Rather the complaints system must be one which could be used within the entire supply chain, as necessary. That must cover all direct (§ 8 LkSG) and indirect (§ 9 LkSG) suppliers. An external system may be used, but this does not exempt companies from the obligation to comply with the statutory regulations. It merely changes the obligation to the review/monitor of the activities of the external provider.
Accessibility of the complaints procedure
The complaints procedure must be publicly accessible, clear, and understandable. In addition to the fact that "persons", not "employees" must be able to make use of it, the complaint procedure must be implemented for all individuals within the supply chain. Consequently, it will be necessary to set up a system that has no restrictions in use, be it linguistic, textual, technical, or local. This raises various questions for implementation, such as the language to be used for the procedure and how to deal with people who are illiterate or do not have access to the internet, where a technical system is established. Restrictions in usability usually result from the supply chain as such. It is not necessary that "anyone" can make a complaint. Rather, "only" everyone along the supply chain must be given this opportunity. Thus, the questions of the type of system and the content requirements differ according to where potential whistleblowers are employed.
Confidentiality not anonymity is key
Confidentiality of those involved in the complaint process must be maintained. This means that the identity of the complainant must be protected. Protection must be comprehensive so that any further information that allows a conclusion to be drawn about the identity of the whistleblower must also be treated confidentially.
Confidentiality does not mean anonymity. However, the most important task is to protect the complainant. Confidentiality is essential to the extent that the implementation of such a procedure can only be profitable if it is also used. If the confidentiality of the entire procedure cannot be adequately maintained, it is less likely to be used. A complainant uses the complaint procedure of their own free will, so that they will only use it in cases where trust in its use can be established. In any event, this means that only those who are necessary for the investigation or resolution of the incident should be involved.
Confidentiality also extends to the company, but not to the subject matter of the complaint. The report and the subject matter can thus be treated separately, provided that no inferences can be drawn.
Protection against any unreasonable disadvantage
This covers any - negative - action by the company in response to the filing of the complaint. The complainant may not be treated differently from comparable employees who have not filed a complaint. All unilateral measures are covered, such as warnings, transfers, dismissals, leaves of absence, etc. A failure to act, which could be reflected, for example, in a promotion not being granted, would also be inadmissible. Further measures are also prohibited. These include intimidation, threats, and coercion. This should also include third parties, i.e., not only the person making the complaint but also his or her relatives and other related persons. The prohibition against discrimination applies both to persons who make a justified complaint and to those whose complaint is unjustified. The intention is to protect the wilful decision to use the procedure.
Participation of (local) committees
The explanatory memorandum to the Act provides that the target groups of the grievance mechanism are to be consulted on the design of the procedure. However, no statement is made on the nature of the participation, as such. The participation of all persons involved in the supply chain can be regarded as unrealistic, so that here, too, reference can be made to employee representatives in the indirect and more direct supplier companies.
If the German company has a works council, the works council does have a right of co-determination. Section 87 (1) No. 1 of the Works Council Constitution Act (BetrVG) applies to the establishment of binding rules of conduct, while section 87 (1) No. 6 applies where a technical system is used to issue the complaints.
Next steps to take
Implementation in individual cases is complex due to the large number of principles to be fulfilled and cases to be depicted. It is therefore essential to deal comprehensively with the individual situation within the company, not only to fulfil the legal requirements regarding implementation, but also to do justice to the immense significance. The complaint procedure is used to report possible violations of prohibitions. This can only work in cases where complainants have confidence in the process as such.