The 1x1 of the supply chain due diligence law - part 2

Part 2: The complaint procedure

Having already provided information on the most important aspects of risk analysis in our article of October 5, 2022, we would now like to take a closer look at the complaints procedure provided for in Sections 8 and 9 of the Supply Chain Segregation Obligations Act (LkSG).

In this context, the Federal Office of Economics and Export Control (hereinafter referred to as "BAFA") has meanwhile published an initial handout entitled "Complaints Procedure under the Supply Chain Segregation Obligations Act". We would like to take this as an opportunity to show you the most important aspects - due to the abundance of information and requirements - in an understandable way. This article is part of a series ("The 1x1 of the supply chain due diligence law"), which takes a closer look at the LkSG and its concrete requirements, in particular to provide affected companies with an initial support.

An initial overview

The BAFA refers to the complaints procedure as a "core element of the due diligence obligations". Against this background alone, companies are well advised to implement the obligations arising from the LkSG in a thorough and structured manner.

On the one hand, the complaints procedure must be suitable for providing internal and external persons with the opportunity to lodge a complaint, whereby various design options, such as purely internal complaints procedures, equivalent external procedures or a combination of both, can be considered. Since the individual due diligence requirements of the LkSG complement each other, the complaints procedure - in preparation for a risk analysis to be carried out - can be seen in particular as a suitable source of information for becoming aware of human rights and environmental risks.

Pursuant to Section 10 (1) LkSG, companies are also obliged to continuously document the fulfillment of all due diligence obligations - this thus includes the complaints procedure as well as the resulting measures - and to keep these for a period of at least seven years. In accordance with the provisions of Section 10 (2) LkSG, an annual report on the fulfillment of due diligence obligations in the previous fiscal year must also be prepared and subsequently made publicly available free of charge.

Requirements for the design of the complaints procedure

Since the complaints procedure - as already mentioned - must be accessible to both internal and external persons, care should first be taken when selecting and implementing an appropriate mechanism to ensure that any hurdles are identified in advance and taken into account when designing the procedure. As will be shown in more detail, it may be necessary in particular to gear the complaints procedure to particularly vulnerable groups of persons as well. The LkSG also follows a risk-based approach, which is why it is nevertheless advisable to identify the most important target groups for the complaints procedure separately - on the basis of the risk analysis - and to provide them in particular with the most effective contact option possible. Although there is no obligation to provide all target groups with the "same" access to the complaints procedure, these different objectives must be reconciled. The complaints system must also be designed on the basis of the risks actually identified, which means that the effort required to design the procedure increases with the severity and number of risks identified.

As a "core obligation", a publicly available set of procedural rules must also be drawn up, which should contain the following information in particular:

• Scope of the procedure;
• Complaint channels and their local/temporary availability;
• Time frame and procedural steps for processing complaints;
• Contact persons and responsibilities;
• Safeguards that counteract the disadvantage or punishment resulting from a complaint.

Even where an external complaints procedure is used, appropriate external contacts should be clearly identified, as well as internal contacts for further investigation.

Since some aspects are particularly emphasized by BAFA in the design of the complaints procedure, these will be considered in more detail below.

Requirements for the persons involved

A number of aspects must be taken into account, particularly with regard to the suitability, qualifications and time availability of the contact persons. First of all, the contact persons must be able to act impartially. This means that they must be independent in the performance of their duties and must not be subject to any instructions. The contact persons must also be bound to secrecy in order to rule out any confidentiality deficits. Whether and to what extent completely anonymous complaints are accepted - in contrast to the requirements of the Whistleblower Protection Act - is left up to the respective company, but is "recommended" by BAFA.

In addition, it is essential that the respective persons have been appropriately trained and actually have sufficient time resources to process the respective facts accordingly.

Requirements for the course of the complaints procedure

The complaint procedure is also subject to clear legal requirements. In particular, companies must ensure that

• persons providing information receive an acknowledgement of receipt of their complaint and that continuous contact takes place, or can take place;
• the content of the complaint is examined to determine whether it falls within the scope of the complaints procedure;
• the relevant facts are processed internally, in particular in order to create a realistic horizon of expectations regarding the preventive and remedial measures to be taken;
• the identity of the person making the report is treated confidentially; and
• there is adequate protection against disadvantage or punishment.

Optionally, there is also the possibility of offering whistleblowers a procedure for the amicable settlement of disputes. The focus here is particularly on solution-oriented cooperation and the development of appropriate remedial and/or preventive measures.

Requirements for the accessibility of the complaints procedure

As already shown, any hurdles should be excluded as far as possible when selecting and designing the complaints procedure. In order to strengthen the trust of the - possibly also vulnerable - target groups, BAFA recommends in its handout to involve interest groups (e.g. trade unions or employee representatives) in the design of the complaints procedure. The following are cited as conceivable hurdles in particular:

• Unfamiliarity with the procedure;
• Language barriers;
• Limitations due to a lack of reading or writing skills;
• lack of confidence in the procedure;
• the cost of the procedure, and
• the lack of access to the procedure.

Since the effectiveness of a complaints procedure depends to a large extent (also) on the aforementioned circumstances, the respective criteria should not be thoughtlessly "undermined". Ultimately, an effective complaints procedure also serves the respective company itself, as it can in this way once again significantly promote adherence to the compliance requirements under the LkSG.

Practical advice

Since the LkSG imposes a large number of requirements - especially with regard to the complaints procedure - any synergy effects should be used as sensibly as possible. It is therefore particularly advisable to examine whether existing reporting or complaint channels can be used. In our opinion, it should also be evaluated whether, for example, the requirements of the Whistleblower Protection Act ("in one go") can be implemented jointly.

Since - in addition to other requirements to be observed - an annual effectiveness review of the complaints procedure is also mandatory, the selection of an appropriate channel (e.g., in the form of a tool) should be thoroughly considered. In our opinion, professional advice is indispensable for this purpose, especially in order to counteract any official complaints or even the risk of fines. Since a complaints system regularly involves the processing of personal employee data, issues relating to labor law and data protection law must also be reconciled.

SKW Schwarz has developed a quick check in the form of a questionnaire, which we are happy to provide to companies, in order to quickly and easily assess any need for action and implementation. After an initial evaluation, we will then be happy to provide personal advice in order to work out a practical way of implementing the LkSG that is tailored to the company.