New Supply Chain Act since January: Synesgy platform makes collecting relevant information from suppliers particularly easy

• Supply chain due diligence act (LkSG) will become a data and IT challenge for many companies - more than 3,600 companies will be affected by 2024
• Synesgy platform enables the collection of relevant LkSG information from suppliers and integrates efficiently with existing LkSG, ESG or compliance applications
• Synesgy certificate demonstrates commitment to ESG and saves on process costs

The Supply Chain Sourcing Obligations Act (LkSG) has been mandatory for all companies with more than 3,000 employees in Germany since the beginning of 2023. According to the Federal Ministry for Economic Cooperation and Development (BMZ), around 700 companies are already directly affected by the law, and many more as direct or indirect suppliers. Business representatives complain about the administrative burden - but there are solutions: the global information service provider CRIF has integrated a separate and multilingual LkSG questionnaire into its proven Synesgy platform, with which companies can query, archive and manage all relevant information on compliance with the Supply Chain Act from their national and global suppliers. The Synesgy platform, which is a digital platform is available in 18 languages and already enables companies to conduct a holistic and efficient ESG sustainability assessment of their suppliers domestically and abroad. The ESG assessment was already expanded in June 2022 to include the relevant criteria of the Supply Chain Act, which came into force on the 1st January 2023.

The Supply Chain Sourcing Obligations Act grows into a challenge

The Supply Chain Due Diligence Act requires companies to establish comprehensive due diligence processes to detect, document and respond to human and labour rights violations in their supply chains. This makes the LkSG an important new aspect of risk and supplier management. "What is well-intentioned proves to be difficult and costly for the companies concerned when it comes to implementation. Practical experience to date shows that the law is becoming a real information and thus data and IT challenge for many companies," explains Dr. Frank Schlein, Managing Director of CRIF Germany. "With Synesgy, we have already been offering companies an efficient tool for the holistic ESG analysis of their suppliers for some time. With our expansion, we now also cover the new requirements of the Supply Chain Act with it."

Officially, since 01.01.2023, only about 700 companies with more than 3,000 employees are obliged to inspect their suppliers (regardless of their company size) for human rights compliance and certain environmental aspects,. From 2024, the circle of obligated parties will expand to more than 3,600 companies that employ more than 1,000 employees in Germany. However, the actual number of companies that audit their suppliers according to the Supply Chain Due Diligence Act is now significantly higher. This is because a number of large companies affected by the LkSG also require their medium-sized suppliers and those not affected by the LkSG (<3,000 or <1000 employees) to also comply with the LkSG and in turn comprehensively inspect their upstream suppliers. Thus, significantly more companies are involved with the LkSG than originally planned by the legislator.

Risk management with minimal effort thanks to Synesgy platform

In order to facilitate the integration of the new Supply Chain Act for affected companies, CRIF has added a separate LkSG section to its proven Synesgy platform, with which the required data can be quickly and easily collected from suppliers. This enables companies to identify and document risks at their suppliers and, in case of critical answers, to carry out audit actions and, if necessary, appropriate remedial measures according to the LkSG . Thanks to the fully digitalised process, the collection and documentation effort is considerably reduced and the companies can focus their resources on the suppliers who have submitted critical responses as defined by the LkSG.

Depending on the customer's situation, the Synesgy platform can be used to complement already implemented LkSG or ESG solutions or serve as a simple solution for companies that are not obligated under the LkSG, but would like to already holistically screen their suppliers against ESG criteria for ethical or reputational reasons.

"Suppliers also benefit from the questionnaire. Those who answer further questions on sustainability in the sense of ESG after the LkSG survey receive a Synesgy certificate that is valid for 12 months and can be placed on their own website. This creates trust among potential customers, employees and lenders. This is because it shows that the company is facing up to the challenges for more sustainability and regularly undergoes an ESG assessment with the annual recertification. In addition, the company saves process costs because it no longer has to deal with individual customer enquiries on the topic of sustainability, but can refer to the issued certificate," explains Dr Frank Schlein.

The Synesgy questionnaire covers all ESG aspects . The questions developed by CRIF are based on the GRI (Global Reporting Initiative) reporting standard. In addition, the LkSG questionnaire covers all prohibited acts according to the LkSG.

Dr Frank Schlein also sees the solution as a strong lever to create a positive reputation for one's own company: "Companies that already comply with the Supply Chain Act and ESG criteria can anticipate possible customer enquiries and underline their commitment to comply with social, environmental and corporate sustainable criteria. ESG will play an increasingly important and strategic role for any company in the future. We want to support our clients in this in the best possible way and at an early stage. This also includes continuously adapting our Synesgy platform to current regulatory requirements and thus covering the full range of ESG-related requirements."

More information on Synesgy can be found on the platform's website: https://www.synesgy.de

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